Preamble

The House met at half-past Two o' clock

PRAYERS

[MR. SPEAKERin the Chair]

PRIVATE BUSINESS

SOUTH YORKSHIRE BILL

Read a Second time and committed.

SION COLLEGE BILL [Lords]

LONDON TRANSPORT BILL

As amended, considered; to be read the Third time.

Oral Answers to Questions — TRADE

Export Statistics

Mr. Knox: asked the Secretary of State for Trade if he will list the eight countries which took most British exports in the last month for which figures are available.

The Minister for Trade (Mr. Cecil Parkinson): In February of this year the eight countries which received the largest values of United Kingdom exports were the Federal Republic of Germany, the United States of America, the Netherlands, France, the Irish Republic, Switzerland, Belgium-Luxembourg and Sweden.

Mr. Knox: Is it not significant that most of the countries that my hon. Friend mentioned are members of the EEC? Is there any guarantee that we would still be able to sell as much in those countries if we were not in the EEC?

Mr. Parkinson: The removal of barriers against our goods in those countries has, on the whole, helped the increase of trade between us.

Mr. McNally: Is it not an absolute disgrace that Japan does not figure on that list? For how long will the Department allow Japan to build up massive trade surpluses and exploit our third markets? For how long will we continue to do nothing while exports continue from "fortress Japan"?

Mr. Parkinson: We already have voluntary restraint arrangements with the Japanese on motor cars, machine tools, televisions and electronic components. I agree that it is a pity that Japan does not figure among our leading 10 export markets, but the Government have an "Exports to Japan" unit and a permanent showplace in Japan. Our trade with Japan is increasing, but not fast enough.

Mr. Kenneth Carlisle: Do not those figures show how important our growing trade with Europe is for jobs in Britain? If we severed our links with Europe, would not jobs be severely threatened?

Mr. Parkinson: My hon. Friend is right. Of our exports, 45 per cent. go to fellow members of the Community. They are among our fastest growing markets.

Mr. John Smith: Was the Minister disappointed with the attitude that the Japanese Government displayed during recent discussions with the European Commission, in which they indicated their preference to deal bilaterally with the States of the EEC? Is not that a cue for the Government to make it clear that they will consider all trade relations with Japan on a bilateral basis rather than through the EEC, which is clearly ineffective in that regard?

Mr. Parkinson: The right hon. Gentleman knows better than any other hon. Member that arrangements other than informal arrangements of the industry to industry type which we have on motor cars, are a matter for the EEC. It is impossible for Britain to impose quotas on Japan without the full co-operation of other members of the Community. If I may say so, the right hon. Gentleman is asking a cheap, simplistic and untypical question.

Flags of Convenience

Mr. Hooley: asked the Secretary of State for Trade if, with reference to the United Nations Conference on Trade and Development in May, he will make a statement of Government policy on the phasing out of lags of convenience.

Mr. Clinton Davis: asked the Secretary of State for Trade if he will make a statement on Her Majesty's Government response to the report of the United Nations Conference on Trade and Development secretariat entitled Action on the Question of Open Registries.

Mr. Austin Mitchell: asked the Secretary of State for Trade if he will make a statement on the Government's policy in connection with the United Nations Conference on Trade and Development in May on the phasing out of flags of convenience.

The Secretary of State for Trade (Mr. John Biffen): Our shipping policy is based on two requirements: the need to preserve safety at sea; and the need to preserve the British shipping industry and the jobs which depend on it. Neither of these objects would be served by an indiscriminate attack on countries operating open shipping registries. We wish to see the preservation of competitive international conditions for shipping in which each nation is free to set its own conditions for admission to its register, subject to the full observation of internationally agreed safety standards.

Mr. Hooley: Is the Secretary of State aware that on present trends half the merchant fleets of the world will be registered with countries, such as Panama and Liberia, which have little concern for safety, pollution or the welfare of seamen, while the other half will be registered with the Communist world? Does the right hon. Gentleman regard that situation as ideal?

Mr. Biffen: No. I made it clear in my original answer that we believe that there should be full observation of internationally agreed safety standards.

Mr. Davis: Does not the Secretary of State realise that the issue of flags of convenience is not only about substandard shipping but the avoidance of taxation, obligations to train crews, proper certification and adopting a permissive attitude towards international legislation? Does he regard this as fair competition for our fleet? Is not his inertia in these matters a reflection, yet again, of the fact that he has lost the will to be even apathetic?

Mr. Biffen: I congratulate the hon. Gentleman on a choice turn of phrase. However, I do not think that it applies to myself or to the present Administration. In a free world different standards will be applied nationally by shipping companies and shipping regimes, one from another. But, putting safety to one side, as I mentioned in my original reply, we have to acknowledge that there will be competition between national shipping fleets, and it is up to those in this country to ensure that we have a fleet which operates to the highest economic standards.

Mr. Mitchell: Is the dodging of international obligations, which is inherent in flags of convenience, compatible with genuine, free and fair competition? If he will not work towards international agreement to abolish this monstrosity, may I ask whether he has any proposals to increase inspection and enforcement at the ports to try to control flags of convenience?

Mr. Biffen: I would not in any way support the disregarding of international obligations in this matter. The Government's policy is to work with other countries to secure the highest observation of international standards.

Mr. James Johnson: Will the Minister confirm or deny the suggestion that any—[Interruption.]—of our shipping lines are contemplating moving overseas? If so, will he condemn that as being a mean and despicable action?

Mr. Biffen: I missed a good deal of what the hon. Gentleman said, through no fault of his. But, inasmuch as I heard what he said, I agree with him.

Mr. Leighton: What does the Minister mean by the phrase "putting safety to one side"?

Mr. Biffen: I stated in my original answer that the Government believed in the full observation of internationally agreed safety standards. But many competition matters between shipping fleets legititimately concern other areas.

Export Credits Guarantee Department

Mr. Sims: asked the Secretary of State for Trade what representations he has received concerning the changes in the Export Credits Guarantee Department cover for third market trading.

Mr. Parkinson: I have received a number of representations from merchants and other organisations for relaxing the more stringent terms of cover for external trade introduced recently. However, the heavy losses being met on this facility have made these changes necessary if ECGD cover for direct exports is not to be adversely affected.

Mr. Sims: Does my hon. Friend agree that British trading houses make a substantial contribution to the

nation's economy not only in their direct export business but in third market trading? Is he aware that while the trading houses are grateful that the ECGD has decided to continue cover on external trading, a number of those houses, particularly those involved in the chemical business, will be seriously affected by the withdrawal of buyer default cover? Will he reconsider the situation with regard to that aspect of the changes?

Mr. Parkinson: I should like to help my hon. Friend, but the House should know that this cover offered by the ECGD has resulted in substantial overall losses of about £75 million, and £23 million on buyer credit default. Therefore, we had to look at the terms of the cover and tighten up the premiums. However, we have tried to make sure that those who have made the biggest claims in the past pay the bigger premiums in the future.

Mr. Durant: Will the Minister speed up the procedures in this matter, because contracts are often lost owing to the long delay in getting decisions?

Mr. Parkinson: If my hon. Friend will give me specific examples, I shall follow them up. I take note of his general point.

Non-disclosure and Breach of Warranty

Mr. Greville Janner: asked the Secretary of State for Trade when he expects to complete consultation on the Law Commission's report on non-disclosure and breach of warranty, Cmnd 8064.

The Under-Secretary of State for Trade (Mr. Reginald Eyre): The first written round of consultation is now virtually complete, and my Department is studying the submissions we have received. Officials will shortly be undertaking a round of meetings with those interested. It is not possible to say now how long that will take or whether it will complete the consultation.

Mr. Janner: Does the Minister agree that the present rules are a major snare and trap for any buyer of insurance, corporate as well as individual? Does he not feel a sense of urgency in dealing with this matter, as it was excluded from the Unfair Contract Terms Act? When is he proposing to take action?

Mr. Eyre: Following the Law Commission's report, my Department issued a consultative document in which it acknowledged the need for reform and gave its initial views on the major issues. The hon. and learned Gentleman knows that the matter is complicated by the existence of a draft directive. It is clearly undesirable to have two major changes in United Kingdom law on this subject in rapid succession.

Mr. Clinton Davis: Will the Minister—as a change from previous practice with his Government—give an assurance that he will invite the insurance trade unions to consult him on this very important matter?

Mr. Eyre: My Department welcomes consultation on all these matters with any interested parties. Naturally that would include the trade unions.

Air Transport Services (Australia)

Mr. Neubert: asked the Secretary of State for Trade what steps he is taking to encourage greater competition in air transport services to Australia.

Mr. Eyre: The Civil Aviation Authority recently rejected applications by British Caledonian Airways and Laker Airways to operate between the United Kingdom and Australia, but indicated that it would look sympathetically at an application for a new service on this route in which British and Australian interests would participate jointly. Since the CAA decision is the subject of an appeal to my right hon. Friend, I cannot comment on it.

Mr. Neubert: I hope that my hon. Friend will not think me unappreciative of his efforts if I say that the present arrangements which buttress and protect the interests of two high-cost, high-fare operators—British Airways and Quantas—are by no means good enough. Will he continue to press the Australian Government to allow the Lakers and British Caledonians of this world loose on this route for the benefit of the British travelling public?

Mr. Eyre: On the specific point, my hon. Friend will know that I cannot say more because of the appeal. But, being an avid supporter of lower fares whenever they are economically justified, I should like the House to know that the British, Australian and South-Eastern Asian Governments have recently agreed on a new fares package for the route which is being introduced from today. This new fares package should, therefore, have considerable interest for travellers to and from Australia.

Mr. McCrindle: I welcome any opportunity to enable people to fly more cheaply to and from Australia. Does the Minister accept that if the revenue of British Airways is to be diluted on one of their principal routes, that may not necessarily be in the best interests of Government policy in disposing of 49 per cent. of the share capital of British Airways?

Mr. Eyre: My hon. Friend must have regard to the fact that consumers are entitled to lower fares whenever these are economically justified.

Chimneys (Safety)

Mr. Gwilym Roberts: asked the Secretary of State for Trade if he will make a further statement on his plans to inform the public on the dangers of blocked flues, defective chimneys and related problems.

The Minister for Consumer Affairs (Mrs. Sally Oppenheim): In view of the 158 tragic deaths reported in England and Wales in 1979 from accidental poisoning by gas and vapours due to blocked flues and chimneys and inadequate ventilation, I propose to start a widespread publicity campaign this autumn, before the winter heating season starts. It will pay particular attention to the needs of the elderly.
Meanwhile, I hope that this reply will alert all concerned to the potential dangers of inadequate ventilation for any heater burning solid fuel, gas or oil.

Mr. Roberts: I greatly welcome the right hon. Lady's answer, and it will also be welcome to many of my constituents who bring these matters before me. What consultations will she have with local authorities and what part are they expected to play?

Mrs. Oppenheim: I thank the hon. Gentleman for his kind remarks and assure him that wide consultations took place before the planning of the publicity campaign started

in order to take account of the experience of all interested parties. The consumer councils involved have played an active role in helping us to promote the scheme.

Mr. Anthony Grant: Has my right hon. Friend seen the much advertised cheap safety check scheme offered by the gas boards? How helpful does she think it will be in this context?

Mrs. Oppenheim: I have seen those advertisements. A routine check on basic services can be carried out for about £9 in London and £8 elsewhere. I am concerned that people should have safety checks, but they may lead to much higher costs and eventually to disconnection of supplies. I do not want to discourage people from having the checks, but they should not think that the quoted prices are necessarily the end of the expense.

Mr. John Fraser: Will the right hon. Lady pay tribute to the contribution to safety made by gas board showrooms and confirm that she will play no part in divesting gas boards of their retail activities?

Mrs. Oppenheim: I am always prepared to pay tribute to every part of any industry that contributes to safety. Many people right across the gas industry contribute to the safety of consumers.

Overseas Ministerial Visits

Mr. Viggers: asked the Secretary of State for Trade how many countries have been visited by Trade Ministers since May 1979.

Mr. Biffen: Fifty eight, Sir.

Mr. Viggers: I congratulate my right hon. Friend and his colleagues on that remarkable display of energy, which has been most successful in promoting exports by this country. Does my right hon. Friend share the view that his energy has not been matched by British industry, particularly in the Far East where there is a danger that we may lose opportunities in that rapidly expanding market?

Mr. Biffen: I thank my hon. Friend for the first part of his remarks. On the second part, I am sure that British industry and commerce will seize all the profitable potential in the Far East, and I am not terribly happy about politicians trying to exhort business men on how they should earn their living.

Mr. Gwilym Roberts: Does the right hon. Gentleman accept the importance of the Chinese market for British industrialists and does he share the disappointment of many British industrialists at the recent decision of the Minister for Trade not to visit China in support of the trade drive there?

Mr. Biffen: I accept at once the present and potential importance of the Chinese market, but I am sure that the hon. Gentleman will be the first to acknowledge that the Chinese have been cutting back substantially on their ordering under their latest economic plan. I am sure that the whole House will agree that, although it was highly regrettable that my hon. Friend could not make his planned visit to China, staying to support the Government was a noble objective.

Mr. Dudley Smith: What effect have the ministerial visits had on the disgraceful practice of the counterfeiting of British goods? In the Midlands context, I am thinking particularly of car components.

Mr. Biffen: The difficulty to which my hon. Friend draws attention is well known. We are making representations to the Governments concerned, and ministerial visits play a part in that process.

Mr. Skinner: Does the Secretary of State recall that a little over 12 months ago, when the Russians invaded Afghanistan, the Tory Government made great play of principles and the fact that they would stop trade with the Soviet Union? Am I correct in believing what I have read in the past few days, namely, that this Tory Government have now decided to encourage trade with the Soviet Union once again? Does that mean that Tory principles last for only 12 months?

Mr. Biffen: No. It means that we do not entertain the blind devotion to ideology that disfigures a certain section of the Labour Party.

Export Credit

Mr. Waller: asked the Secretary of State for Trade what progress is being made in achieving international agreement on the more cost effective use of export credit.

Mr. Parkinson: The international agreement setting guidelines for officially supported export credit terms is the OECD consensus. This was established in 1976 but negotiations for its revision are taking place this year, aimed particularly at the problem of the difference between current market interest rates and the minimum rates set by the consensus. Little progress was made at the meeting of participants last month, but further meetings have been arranged for later this year. One of the difficulties preventing an increase in interest rates under the consensus has been the fall in interest rates in Japan.

Mr. Waller: Can my hon. Friend confirm that the cost of export credit guarantees is about £500 million per annum? What has been the effect on that cost of changes in interest rates throughout the world in recent months?

Mr. Parkinson: The cost to the taxpayer arises from the difference between our market rate—the rate that the Government pay for the money—and the rate at which we lend it to foreign importers. Last year, that difference cost nearly £500 million. Obviously, the reduction of five points in MLR from the peak of 17 per cent. should reduce the cost to the Government, but we believe that the consensus is fundamentally out of line with the real rate of interest world-wide and needs revision.

Stand-by Vessels (Safety)

Mr. Robert Hughes: asked the Secretary of State for Trade, pursuant to his reply on 5 May to the hon. Member for Aberdeen, North, when his Department's investigation into stand-by vessel safety guidelines will be completed; and if he will undertake to publish the results of the inquiry.

Mr. Eyre: I hope to be in a position to make a statement by the end of this month.

Mr. Hughes: I am glad to hear that. But will the hon. Gentleman answer the second part of my question? Will he agree to publish the results of the inquiry? In view of the widespread concern about what is happening with regard to safety vessels in the North Sea, will the hon. Gentleman have the widest possible consultations with

those in the industry, including the trade unions, and keep an open mind on the replacement of guidelines with legally binding regulations?

Mr. Eyre: I shall certainly consider what the hon. Gentleman said about publication, but I hope to emphasise the main principles in the statement. With regard to standby vessels, the certificates of survey are subject to annual renewal and general safety standards are covered by that requirement, which is part of the stand-by vessel code.

Mr. Clinton Davis: Why should there be any question in the hon. Gentleman's mind about publication? This matter is vital to the issue of safety, and a statement or resume of the Minister's views about the inquiry will be blatantly insufficient.

Mr. Eyre: The hon. Gentleman is, as usual, trying to reduce matters to black and white issues. He knows from experience that the publication of entire reports on shipping matters is not always desirable because of the nature of the evidence that we want people to give. The hon. Gentleman should bear in mind that a principle of publishing entire reports would discourage people from giving independent evidence.

Hosiery Imports

Mrs. Faith: asked the Secretary of State for Trade if he will take steps to counteract cheap hosiery imports from Italy.

Mr. Parkinson: If my hon. Friend or the hosiery industry knows of evidence of a breach of the Treaty of Rome, my Department will be glad to assist with the assembly and presentation of the case to the European Commission for appropriate action in accordance with the Community treaties.

Mrs. Faith: Is my hon. Friend aware that until recently our hosiery manufacturers had held their share of the United Kingdom market very well, because of their excellent quality and value? However, in the past six months Italian hosiery manufacturers have increased their share of the United Kingdom market from 3 per cent. to 10 per cent. Does my hon. Friend accept that, in view of the increase in the number of cheap imports, there should be an investigation into trading practices to see whether any dumping is taking place?

Mr. Parkinson: I am slightly puzzled by my hon. Friend's question. I understand that imports from Italy in 1980 actually fell to 21 million pairs from 27 million pairs. As she knows, it is difficult within the Community to take action against other member States' products on the ground that they are cheap. Unwelcome competition is not always unfair.

Mr. Greville Janner: The Minister suggests that his hon. Friend should bring forward evidence of breaches. Should not the Department look into the manner in which the treaty is being complied with? Is the hon. Gentleman aware of the enormous unemployment and hardship in the hosiery industry? Is he prepared to set up an investigation into dumping whether from within or outside the Community?

Mr. Parkinson: I am trying to separate the gush from the question in the hon. and learned Gentleman's statement. The concept of dumping does not apply within


the Community, but it does apply from outside. If evidence is available we shall follow up the cases. The industry and the Government work together in the preparation of a case. Each needs the information that is available to the other.

Mr. Greville Janner: On a point of order, Mr. Speaker—

Mr. Marlow: Is my hon. Friend aware that there is also a strong—

Mr. Janner: rose—

Mr. Speaker: Order. Is the hon. and learned Member for Leicester, West (Mr. Janner) giving me notice that he wishes to raise the matter on the Adjournment?

Mr. Janner: I shall raise the matter afterwards.

Mr. Speaker: That will be too late. If the hon. and learned Gentleman is giving me notice, I shall move on. Mr. Marlow.

Mr. Marlow: Is my hon. Friend also aware that strong suspicion exists of unfair trading in the export of Italian footwear to this country? Although the volume and the value of our imports from Italy are even greater than our footwear exports throughout the world—

Mr. Speaker: Order. The question relates to hosiery. If the hon. Gentleman wishes to ask a question about footwear, he must table it.

Mr. Campbell-Savours: If the hon. Gentleman will not investigate allegations of dumping, will he investigate any possible cost advantages to the Italian industry which enable it to compete in the manner that it does in the British market?

Mr. Parkinson: We have looked into a number of allegations of various breaches by Italian nationals of their national rules. It is, however, extremely difficult to mount a case on the basis that there is in Italy a black economy which helps their manufacturers when the president of our Board of Inland Revenue has said that a black economy exists in our country and has also estimated its size.

Mr. Janner: On a point of order, Mr. Speaker. While fully accepting that, in the knock-about of Question Time, one can make remarks that are not intended to be offensive, when one is dealing with unemployment and hardship—

Mr. Speaker: Order. Did the hon. and learned Gentleman wish to give notice about raising the matter on the Adjournment?

Mr. Janner: No, Sir.

Mr. Speaker: In that case, we are wasting time.

Later—

Mr. Janner: On a point of order, Mr. Speaker. I am sorry that I could not give you notice beforehand. You may recall that in my supplementary question to question 11 I referred to the disastrous state of the hosiery industry, and to the resultant suffering in my constituency. In his reply, the Minister used language which I know my constituents would find extremely offensive, even though it might not have been personally intended. Is it in order for the Minister to be given the opportunity to withdraw that language?

Mr. Speaker: I am lost for words. It is a long time since I have heard a point of order with such little strength.

Oil Spillage Dangers (Lyme Bay)

Mr. Emery: asked the Secretary of State for Trade if he will take action to overcome the dangers of oil spillage in Lyme Bay.

Mr. Eyre: My Department is monitoring closely the ship to ship transfer operations in Lyme Bay and the Department's surveyors carry out periodic inspections to ensure that agreed procedures and standards are maintained.

Mr. Emery: Will my hon. Friend accept that there is a vast increase of ships anchoring in Lyme Bay due to both the problems of tankers and of oil supply? His Department, in evidence to the Select Committee on 26 March last year, suggested that increased powers would assist in achieving greater safety. Does my hon. Friend not feel that it is time that the Government acted to bring these powers on to the statute book?

Mr. Eyre: I appreciate my hon. Friend's concern about this matter which involves serious environmental considerations for Lyme Bay. I shall ask my noble Friend, who has ministerial responsibility for these matters, to consider carefully my hon. Friend's point. My information is that high standards have been maintained by the operating companies which deal with this work in Lyme Bay. I assure my hon. Friend that the most stringent periodic checks are carried out by inspectors from my Department.

Mr. Adley: Is my hon. Friend aware that hon. Members, such as my hon. Friend and I, representing coastal constituencies, are faced with a constant fear of disaster through the movement of oil tankers? Will he comment on the accession of Greece to the EEC? In view of Greece's poor record, what action is proposed by the Department to impose the highest standards on Greek-owned and operated oil tankers?

Mr. Eyre: I shall be glad to answer any detailed question that my hon. Friend wishes to raise about the accession of Greece to the European Community if he puts down a question. I wish to reassure him about the situation in Lyme Bay. As he knows, specially equipped vessels are available at Brixham, Poole, Southampton and Plymouth to deal with any spillage that might occur.

Overseas Importers

Mr. Patrick McNair-Wilson: asked the Secretary of State for Trade whether he will consider improving the computerised intelligence service to assist overseas importers in search of British produce.

Mr. Parkinson: The British Overseas Trade Board keeps the operation and efficiency of the export intelligence service under constant review. Up-to-date technology for processing inquiries from overseas was installed in 1979. A survey of exporters' views of the service will be carried out this year. This will provide guidance about any desirable future changes.

Mr. McNair-Wilson: British embassies througout the world are now increasingly the focus for providing commercial information about Britain. Will the Minister consider discussing with his right hon. Friend the possibility of establishing computer terminals in British embassies? That would enable up-to-date information to


be given to those who wished to buy British goods. Frequently, at the moment, information is supplied on printed sheets that are inevitably often out of date.

Mr. Parkinson: I thank my hon. Friend for his interesting suggestion. I can perhaps answer him best by saying that he has added to the work of the review committee which will certainly consider his suggestion.

Multi-fibre Arrangement

Mr. Campbell-Savours: asked the Secretary of State for Trade if he will make a statement on the present state of negotiations on a renewed multi-fibre arrangement.

Mr. Woolmer: asked the Secretary of State for Trade if he will make a statement on the present state of negotiations on a renewed multi-fibre arrangement.

Dr. John Cunningham: asked the Secretary of State for Trade if he will make a statement on the present state of negotiations on a renewed multi-fibre arrangement.

Mr. Straw: asked the Secretary of State for Trade if he will make a statement on the present state of negotiations on a renewed multi-fibre arrangement.

Mr. Biffen: Negotiations for the renewal of the multifibre arrangement are taking place within the framework of the General Agreement on Tariffs and Trade. There was a two-day meeting of the GATT textiles committee on 7–8 May in Geneva, and talks will resume there in the week beginning 13 July.
Within the Community, we are currently studying draft proposals by the Commission for an outline negotiating mandate, and I hope that this will be considered by the Council of Ministers on 23 June. However, the decisive phase of negotiations is not likely to begin until after the summer, and a further more detailed negotiating mandate may then be necessary.

Several Hon. Members: rose—

Mr. Speaker: Order. I propose to call first those hon. Members whose questions are being answered.

Mr. Campbell-Savours: Is the Secretary of State aware that the European consultative document to which he indirectly referred has been made available to trade associations within the European Community? It has also clearly been made available to the right hon. Gentleman. It has not, however, been made available to hon. Members or, I understand, to any Members of Parliament within the European Community. As an early political initiative is necessary, why does not the right hon. Gentleman make the document, if possible, available to hon. Members?

Mr. Biffen: The hon. Gentleman makes a fair point. I shall see whether what he asks can be done.

Mr. Woolmer: The wool industry has seen a fall in production of 14 per cent. in the last 12 months, the manmade fibres industry, a fall of 16 per cent. and the cotton industry, a fall of over 25 per cent. Will the right hon. Gentleman agree that it is not therefore surprising that the trade unions and the employers are gravely concerned about what they see as major weaknesses in the Commission's negotiating position, revealed in this so-far

secret document? Will the right hon. Gentleman state the Government's position on the recession clause which the Commission appears not to be backing?

Mr. Biffen: The Government are broadly in favour of something approximating to a recession clause.

Dr. Cunningham: Did the Secretary of State note the comments attributed inThe Sunday Times yesterday to the chief executive of Courtaulds who talked about a further rundown in the British textile industry? Is this not a matter for deep concern? In the last two years, more than 150,000 jobs in the industry have disappeared. Given that over 600,000 jobs are at stake in the British textile industry and associated industries, should not the issues be debated fully in the House before the Government commit themselves to any final decisions?

Mr. Biffen: I have not seen the article to which the hon. Gentleman refers. However, I am of course well aware of the anxieties expressed by people in the textile industry about the problems of the recent past and of their concern about the liberal nature of any replacement or successor to the multi-fibre arrangement. I shall ensure that the hon. Gentleman's request for a debate is put to the Leader of the House. We shall see what comes of that.

Sir Charles Fletcher-Cooke: In connection with the GATT negotiations, which according to my right hon. Friend are to precede the European Community negotiations, may we have an assurance about the American attitude, and in particular about the recent steps that the United States Government have taken to decrease their attack on the British market? Is my right hon. Friend satisfied that enough has been done?

Mr. Biffen: When my hon. and learned Friend has a chance to study my answer he will realise that the GAIT and Community discussions overlap to some extent. We welcome recent moves by the United States to dismantle artificial aids to their textile exports. It is too early to judge the consequences of that.

Mr. Barry Jones: Will the right hon. Gentleman concede that American unfair practice has hit hard the man-made fibre sector, and in particular firms such as Courtaulds? Is he aware that in my constituency 380 manmade fibre textile jobs are to go in July? What further action can he take to prevent the demoralisation of the man-made fibre industry?

Mr. Biffen: As the hon. Gentleman might expect, since I am a political neighbour, my answer to the first part of his question is "Yes". But my hon. Friend the Minister for Trade and I had the chance to represent to Senator Brock on his recent visit our anxiety that the natural gas deregulation is proceeded with as speedily as possible. It will be appreciated that that is within the gift of Congress and not of the Administration.

Mr. Archie Hamilton: May we have an estimate of the effect of the MFA on the employment of poor people in the Third world?

Mr. Biffen: I cannot give an estimate without notice. It is one of the several considerations that must be taken into account by the Government and their sister nations in the Community when negotiating a successor arrangement. The consumer must not be the orphan in any arrangement.

Mr. John Fraser: Will the Secretary of State impress on the Leader of the House that it would be wrong to go into the negotiations without a mandate from the House of Commons because the subject of the arrangement is crucial to so many constituencies?

Mr. Biffen: I shall draw the hon. Gentleman's remarks to the attention of my right hon. Friend the Leader of the House. They reinforce other voices on the Opposition Benches.

Sterling Parities

Mr Marow: asked the Secretary of State for Trade what has been the effect on trade in manufactures of changes in franc and deutschemark parities with sterling since 1 January.

Mr. Biffen: It is not possible to make a worthwhile estimate on the basis of available information.

Mr. Marlow: Does my right hon. Friend agree that some time ago, when the mark and franc were strong, relatively cheap British labour costs allowed us to compete with the more efficient French and German industries, particularly the engineering industries? Since the pound has become stronger against the mark and franc we have not been able to compete so well, with rather harmful effects on large sections of our engineering industry. Does he agree that we have lost many jobs and that, unless something is done soon, other jobs will be lost? What does my right hon. Friend intend to do about it?

Mr. Biffen: My hon. Friend's remarks underline the importance of improving the domestic cost structure of British industry to enable it to compete in both those markets. I hope that my hon. Friend will not be too pessimistic because it seems to me that the forces which are driving the franc down should, on the whole, help British business.

Mr. Spearing: Have not the recent increases in the £ sterling more than outweighed the advantages of a reduction in or disappearance of tariffs consequent on our joining the EEC?

Mr. Biffen: That is probably true in statistical terms. However, the hon. Gentleman is a fair controversialist in these matters and he will agree that the final, balanced judgment must take into account factors other than the mere two that he mentions.

Sir Anthony Meyer: Is it not the case that fluctuations in the exchange rate have a short-term effect whereas the advantages of securing tariff-free entrance to the European Common Market are permanent?

Mr. Biffen: Yes.

Airports Policy

Mr. McCrindle: asked the Secretary of State for Trade if he has any plans to meet the chairman of the British Airports Authority to discuss the planning of future airports policy.

Mr. Eyre: The chairman of the British Airports Authority is well aware of the Government's airports policy, the main elements of which were set out by my right hon. Friend the Secretary of State in reply to my hon.

Friend the Member for Lincoln (Mr. Carlisle) on 13 May in the Official Report at c. 273–275. My right hon. Friend has no plans at present to discuss this further with him.

Mr. McCrindle: I note that reassertion of the Government's airports policy. In the meantime, has the Minister seen the powerful report by the London chamber of commerce advocating reconsideration of the development of a fifth terminal at Heathrow rather than the development of Stansted, which appears to be the policy of the Government and the BAA? Do the Government have a closed mind towards the possible reconsideration of that policy?

Mr. Eyre: The Government have announced their views on the matter. Individuals and associations are entitled to their views. However, the proposal in favour of expanding Stansted is subject to the outcome of the public inquiry. It will be for the inspector at the public inquiry to consider all the relevant factors and the environmental and other implications of any site put forward as an alternative to Stansted.

Mr. McNally: Did the Minister tell the BAA and the airlines that he is fed up with the obsession for the expansion of airports in London and that he wants greater effort to be put into the expansion of regional airports such as Manchester international airport which has 20 million people and half Britain's industry within its natural catchment area?

Mr. Eyre: I share the hon. Gentleman's regional fervour. My Department has been helpful to Manchester and Birmingham airports, to mention only two, in the regional connection. There is a need for a flexible solution to the provision of adequate airport facilities in the South-East which allows for incremental capacity.

Mr. Robert Atkins: Does my hon. Friend agree that there comes a time when we must reconsider the whole basis on which airports are funded? Does he agree that it is worth comparing our airports with examples of new airports and the facilities that they offer, such in the United States? Does he, therefore, accept that his Department and the chairman of the BAA should be giving that matter urgent attention?

Mr. Eyre: I note with interest my hon. Friend's emphasis. In the last year in particular my Department's policy of encouraging the development of regional airports where appropriate has been a distinct practical advantage.

Mr. Adley: Is it improper parliamentary language to say that the Minister's first two answers sounded strangely like ministerial gobbledegook? Is not the question one of national interest and strategic planning rather than of producing another airport which the BAA wants in the South-East? Will the Minister please take on board the fact that the Government and the House should give a lead in laying down guidelines for the BAA? Does he agree that the national interest cannot be left to a planning inspector's decision about whether an airport should be built at Stansted?

Mr. Eyre: The Government's decision followed an examination of existing traffic and the projected growth of traffic. The South-East, on a regional basis, is as entitled to have its problems taken into account as other regions.

European Community (Services)

Mr. Best: asked the Secretary of State for Trade what steps the Government are taking to accelerate the liberalisation of services in the Community.

Mr. Eyre: We attach high priority to making a full reality of the freedom to provide services throughout the European Community. We are therefore working in all appropriate sectors to secure the early adoption of the necessary Community legal instruments.

Mr. Best: Will my hon. Friend be a little more positive in his approach, because surely he will accept that the principal beneficiary of the liberalisation of services would be the United Kingdom? Does not he think that both the Government and the Commission should prosecute the matter with more vigour?

Mr. Eyre: I agree with the importance that my hon. Friend attaches to the subject. Services are particularly important in our economy, and the Government are foremost in pressing the Community for action to harmonise away obstructive national legislation so that free trade in services may become a reality.

Oral Answers to Questions — OVERSEAS DEVELOPMENT

Brandt Report

Mr. Canavan: asked the Lord Privy Seal whether he intends taking any new initiatives, following the lobby of Parliament on the Brandt report.

The Minister for Overseas Development (Mr. Neil Marten): The Government have noted the views expressed by participants in the Lobby and will take account of them in making preparations for the Mexico summit next October.

Mr. Canavan: In view of the Brandt report's emphasis on the need to spend more on overseas aid and less on the arms race, what possible justification is there for the Government's plans to spend less on overseas aid between now and 1984, by which time we shall be spending over 15 times as much on so-called defence? Why do the Government have no intention of meeting Brandt's target of spending 0·7 per cent. of GNP on overseas aid by 1985?

Mr. Marten: The Government intend to do that, but they cannot give a date. That must depend on this country's economic circumstances. In answer to the hon. Gentleman's question about expenditure on armaments, it is the first duty of any Government to see that their country is properly defended. That is why we spend money on armaments.

Mr. Bowen Wells: Does the Minister accept that today of all days we should congratulate the Commonwealth Development Corporation on its results for last year? Does he accept also that the major contribution that this country could make to achieve the Brandt report's proposals is to make more funds available to that corporation? As I have been pressing the Government on the matter for over a year, is it not time that the Treasury gave way to my hon. Friend's representations and made money available to expand the Commonwealth Development Corporation?

Mr. Marten: The answer to the first part of my hon. Friend's question is "Yes". The answer to the second part is that the matter is still under consideration in the Treasury.

Several hon. Members: rose—

Mr. Speaker: Order. This matter arises in three other similar questions, but I shall call one speaker from the Front Bench.

Mr. Guy Barnett: Did the hon. Gentleman notice statements that arose from the recent Brandt commission's meeting, particularly a statement by his right hon. Friend the Member for Sidcup (Mr. Heath)? When will the Government realise that this is a matter of urgency, and that our credibility at Mexico will depend upon a practical demonstration of our concern by increasing the aid figures as fast as possible?

Mr. Marten: When the economy is stronger I am sure that the Government will wish to increase the aid, but it would be folly to promise to increase it when we do not have the resources to do so. During the current year we are giving £1,037 million in cash aid. In my view, that is a very creditable performance.

Mr. William Hamilton: asked the Lord Privy Seal what changes he intends to make in the United Kingdom's aid programme following his meeting with the recent lobby on the Brandt report.

Mr. Neil Marten: I have considered carefully the points raised at the mass lobby on 5 May but I am not persuaded that changes need to be made to our aid programme, which is both substantial and effective.

Mr. Hamilton: Does the hon. Gentleman agree that that lobby was one of the most responsible and impressive lobbies that had been seen at Westminster for a long time? Will he consider the proposal to publish a Green Paper before the Mexico summit and to have a debate on it in the House, so that the Government's representative may express the views of this House at Mexico?

Mr. Marten: In answer to the first part of the hon. Gentleman's question, I agree that the lobby was impressive in numbers. However, policy is shifted by arguments, not by the numbers of people who take part in lobbies. In answer to the hon. Gentleman's question about the Mexico summit, the meeting of Foreign Ministers to discuss the agenda will not take place until 2 August, when the agenda will be drawn up. It may be impossible to have a debate about the agenda, as I hope that Parliament will have risen by then. The discussions in the August meeting are expected to cover four main matters—namely, food and agriculture, trade and industrialisation, finance and monetary questions, and energy matters.

Mr. J. Enoch Powell: Why do people talk so much bunkum on this subject?

Mr. Marten: That is a question of opinion.

Mr. Trippier: I acknowledge the moral arguments contained in the Brandt report, but will my hon. Friend remember the Government's moral responsibility to the British textile and footwear industries, and point out to the Opposition Members that it is only by the wealth creation of those industries and other manufacturing industries that we can afford to assist the Third world or developing countries?

Mr. Marten: I am grateful to my hon. Friend for making that point. I was interested in the questions on the subject that were put earlier to my right hon. Friend the Secretary of State for Trade and the answers that he gave.

Mr. Deakins: In the run up to Mexico, will the Minister consider getting together with the other six Commonwealth countries going there with a view to achieving a joint approach before the Mexico summit meetings in August and October?

Mr. Marten: I doubt whether there is time to get together, but communications exist between the various Commonwealth countries on the matter and they will take place either before or at the Mexico meeting.

Mr. Stokes: Is my hon. Friend aware that the House and part of the nation are in danger of becoming bemused by the Brandt report, which has become a fashionable, modish phrase so that unless one supports it one must be a bad person? Is it not the first duty of the Government and the House to make sure that the economy of this country is right? After that we can deal with the Brandt report and other matters.

Mr. Marten: The last part of my hon. Friend's statement is correct.

Thirld World Countries (Aid)

Mr. Welsh: asked the Lord Privy Seal whether he has any plans to alter the method of allocation of aid to Third world countries; and if he will make a statement.

Mr. Neil Marten: No, Sir.

Mr. Welsh: Is the Minister aware that the Government's new policy is to offer aid to countries for industrial, commercial and political reasons, and not for development? Thus the poorest countries are suffering more, as the facts show. Will not the Minister show some compassion and change the policy so that aid goes to the poorest countries, and thus make our aid policy more meaningful?

Mr. Marten: The hon. Gentleman is wrong. If he rereads my statement on aid policy in February of last year he will see where he has gone wrong. Development considerations are fundamental to our aid programme, and 62 per cent. of our bilateral aid goes to the poorest of the developing countries.

Mr. Chapman: Whatever our personal views on what I believe is a crucial issue, will my hon. Friend confirm that last year our official overseas aid was £167 million more than it was two years before? Even taking into consideration home inflation—which is not necessarily relevant to overseas aid—that increase of 27 per cent. means that there have been no cuts, whether planned or not.

Mr. William Hamilton: Come off it.

Mr. Marten: I do not have my pocket calculator and therefore I cannot confirm the figures. We as a Government have done extremely well in the economic circumstances that have beset the country over recent years.

Mr. Hooley: Will the Minister stop referring back to his own speeches and refer to the figures showing that the allocation of aid in 1980 swung away from the poorest countries and that aid to India, in particular, slumped disastrously? What will he do to reverse that trend?

Mr. Marten: The hon. Gentleman is wrong about aid to India. He is taking the year 1980. As a member of the Select Committee he will know that aid is dealt with in financial years by both India and this country. In the last quarter of the financial year 1980–81, which was in the calendar year 1981, there was an increase in aid to India. In the last financial year we spent more on aid to India than in the previous year.

Education Bill

Mr. Clement Freud: On a point of order, Mr. Speaker, of which I have given you notice. During the twelfth sitting of the Special Standing Commitee on the Education Bill I tabled a new clause which stated:
It shall be the duty of the National Health Service to acquaint the parents of handicapped babies at birth or after identification of the handicap and again after six weeks in writing, of the existence and whereabouts of the support organisation which deals with their child's specific handicap".
After I had argued my case the Under-Secretary of State for Education and Science said:
The Government have no objection to the principle or to a new clause imposing on health authorities a requirement to inform both the parent and the local education authority at the earliest possible time and, one trusts, with the degree of compassion that was mentioned by the hon. Member for Ely".
He continued:
The services of my Department and all of us will be given to make sure that we get a tight clause which will fulfil all the needs that we have mentioned.
As a result of that promise, at the end of the debate I said:
I beg to ask leave to withdraw the motion."—[Official
Report, Special Standing Committee, 2 April 1981; c. 473–79.]
When I returned from our short recess I received a letter from the Under-Secretary saying that it had proved impossible
to draft a suitable clause embodying the principle underlying your New Clause 1".
He added:
While we entirely accept and support its aim we have been forced to conclude that it is not a matter upon which we should legislate.
The Minister ended his letter by stating:
I am sorry that I am unable to meet you fully on New Clause 1
The Minister must either meet the new clause in some way, or not at all.
I withdrew my new clause because of a succinct and specific promise by the Minister. That promise has not been honoured. Committee procedure, like procedure in the House, is based on trust, and trust is a two-way commodity. I trusted the Minister when I withdrew my motion. My point is that if we cannot have an assurance that what is said in April will be honoured in May, what ministerial pronouncements can we accept?

Mr. Speaker: I have been asked many questions in my time, but that one is certainly not for me. The hon. Gentleman's dispute is with the Government, and there is nothing in our Standing Orders on which I should rule.

STATUTORY INSTRUMENTS &c.

Ordered,
That the draft Job Release Act 1977 (Continuation) Order 1981 be referred to a Standing Committee on Statutory Instruments, &amp;c.—[Mr. Boscawen.]

Orders of the Day — Companies (No. 2) Bill [Lords]

Order for Second Reading read.

The Minister for Trade (Mr. Cecil Parkinson): I beg to move, That the Bill be now read a Second time.
The hon. Member for Hackney, Central (Mr. Davis) and I will shortly have at least one thing in common, namely, that we shall each have spoken from the Front Bench in three Second Reading debates on companies Bills within the last two and a half years. I suggest that we at least deserve a campaign medal, if not the full sympathy of the House.
Debates on companies Bills are always interesting, but they are rarely exciting. I have no reason to believe that today's debate will be any different from the norm.
I should quickly reassure the House that my colleagues have no intention of making a companies Bill an annual parliamentary event. Like the 1978 Bill and the 1980 Act, this Bill owes its existence in the first instance largely to the need to fulfil our Community obligations by implementing a European Community company law directive—the fourth directive. It thus reflects the fact that to some extent the agenda of company law reform and change in this country is being shaped by the various proposals for the harmonisation of company law in the Community.
The Government's approach to the so-called company law harmonisation programme is clear. We consider that harmonisation should be limited to those cases where differences in national laws are positive impediments to the achievement of the basic aims of the Community. Some proposals measure up to this test better than others. We believe that the fourth directive on the accounts of companies, adopted in 1978 under the Labour Government, is a useful directive in making the accounts of companies throughout the Community more readily accessible to and comparable by their users—shareholders, creditors, investors, analysts and others.
A complementary directive on group accounts is under negotiation. A further complementary draft directive, on the accounts of credit institutions, has recently been proposed to the Council of Ministers by the Commission and will be the subject of negotiations over the next few years. While this involves a great deal of activity inside and outside the Government, we believe that harmonisation has a role in this area of company law, and it is in that spirit that we have brought forward legislation to implement the fourth directive.
But the Bill, like the previous Bills, goes well beyond the implementation of a directive. It contains a number of other important and wide-ranging measures to help small companies, streamline Government administration, encourage enterprise, and to strengthen and improve the existing law. The Government also propose to table new clauses in Committee dealing with the disclosure of interests in shares. I shall return to that subject and to the Government's view of the Bill as a whole.
I come now to the details of the Bill. Part I and schedules 1 and 2 deal with company accounting and


disclosure in implementation of the fourth directive. The technical accounting provisions, which are mainly to be found in schedule 1—that is the formats, valuation rules, disclosure requirements and so on—represent a much more detailed and prescriptive statutory approach than we are familiar with in this country. The Government have, however, been at pains to impose the minimum change necessary in actual accounting practice and, so far as is consistent with the directive, to leave as much flexibility and freedom as possible for the development of that accounting practice.
In seeking to achieve those objectives the Government have benefited greatly from the advice and assistance of the Consultative Committee of Accountancy Bodies and the Accounting Standards Committee. The accountancy profession—here I declare my interest as a member of it—has made enormous strides in recent years in developing an effective system of self-regulation. The fact that the Bill will establish a more elaborate statutory framework for accounts than we have had hitherto should not detract from the major and essential role that the profession itself will no doubt continue to play in building on this framework of arrangements, in particular accounting standards, to help achieve in this country the highest standards of practice.
Clauses 1 and 2 restate the basic requirements as to the content of individual and group accounts respectively. The central concept remains the true and fair view, but more explicit guidance is given on how that is to be achieved.
Clauses 3 and 4 extend the requirements of the 1967 Act with regard to the provision of information about subsidiaries and other bodies corporate in which a company holds shares. Clauses 6 to 10 provide for exemptions from the full accounting disclosure requirements for medium and small-sized companies.
I referred earlier to the changes to the statutory framework for accounting matters resulting from the fourth directive. The directive also breaks new ground for Britain by providing for different disclosure requirements for different sizes of company and as between accounts drawn up and accounts filed. The Government received many representations about that aspect of the directive during the extensive consultations that they undertook.
The directive permits member States to impose reduced reporting requirements on medium and small-sized companies both for the accounts that companies prepare for their shareholders and the accounts that they must file with the Registrar. Member States may also dispense with the audit requirements for small companies. In deciding how to implement those options we had to take account of the different perspectives and needs of the various users of accounts, especially shareholders and creditors. The Bill incorporates a package of provisions that strike a reasonable balance between those various considerations.

Mr. Clinton Davis: Will the Minister reconsider the view taken in another place by the Government spokesman, namely, that it would not be helpful to have a clearer method of identifying within which classification a company appeared to be—large, medium or small? I urge the hon. Gentleman to undertake to consider the matter further before we reach Committee stage.

Mr. Parkinson: We have given the matter careful consideration. As the hon. Gentleman knows, the three

sets of criteria that a company must meet to decide in which class it falls are clear and straightforward. On the whole, we believe that they are fair and represent a sensible division of companies between public, medium and small. No doubt we shall consider the matter further in Committee, but not against the background of any undertaking given by me.
I was referring to the need to strike a balance in our consideration of how to take advantage of the options open to us under the fourth directive. First, we decided that virtually all companies would remain subject to the requirement to have their accounts audited. An argument was put forward that smaller companies should not have to have an audit. We considered that argument carefully, but came to the conclusion that we would be wrong to follow that route.
I say that because I believe that most small companies will need to have audited accounts to present to the Inland Revenue and to their banks. It is possible that the principal beneficiaries of the decision not to have an audit will be the accountancy profession, which might thereby be relieved of certain obligations. We reached the conclusion that while it might be popular to exempt smaller companies, most of them would need an audit if their accounts were to be acceptable to their banks, their creditors, and, above all, the Inland Revenue. Therefore, we decided that we would make the audit applicable to all sizes of companies.
Secondly, virtually all companies will be required to prepare full accounts for their shareholders. By virtue of those two requirements, not only will the interests of shareholders be protected, but there will be some assurance that adequate audited financial information will be available for other purposes if required.
Thirdly, the Bill permits medium and small-sized companies to deliver to the Registrar modified accounts containing less information than the full accounts required to be prepared for shareholders. For medium-sized companies, the information that may be omitted relates mainly to details of turnover. For small companies, much more extensive abridgement is permitted. The Bill takes virtually maximum advantage of the derogations available in the directive, and it also sets the thresholds for determining which companies can benefit at the highest permitted level. That reflects our view that w many companies as possible should have the opportunity to take advantage of those derogations—for example, for reasons of commercial confidentiality. It is impossible to say how many will take advantage in practice. The main consideration is that companies themselves are able to make their own choice.
I make no apology for the fact that smaller companies will not need to provide the same quantity of information as will the large companies. An abridged balance sheet giving the basic details of the company's capital structure and its assets will be available, but the small company will regain some of the privacy that it lost as a result of the 1967 Act. That is entirely proper.
I said earlier that virtually all companies will have to prepare full audited accounts for their shareholders. Clause 12 provides an exception to that general rule. We received many representations that it was disproportionate to inflict the whole panoply of accounting requirements on companies that were completely inactive. We agree, and I believe that clause 12 will be generally welcome in providing a sensible approach to dormant companies that


are strictly defined by the clause. If anyone thinks that it is a small matter, I must say that we estimate that there are now 50,000 dormant companies under the unnecessary obligation to file information to show that they remain—as in many cases they have been for some years—dormant.
Clauses 13 to 16 introduce a number of changes to the requirements for directors' reports. Most of those flow from the directive. We have, however, additionally decided to repeal the requirement for directors' reports to give particulars of exports. It may seem paradoxical for the Minister for Trade to be sponsoring such a provision, but experience has shown that that requirement does not result in the disclosure of useful information. It does not, of itself, make any contribution to the economic well-being of Britain. It is a classic example of requiring disclosure for disclosure's sake. I think that we are better off without it.
Clause 17 applies schedule 2, which in turn permits certain categories of company to continue to prepare accounts on the basis of present requirements, instead of those contained in the Bill. The categories in question are banking and insurance companies—for whose accounts harmonisation directives are in the pipeline—and shipping companies to whom the application of the fourth directive may be deferred for up to 10 years.
Clause 18 extends the power available under the 1948 Act to alter the accounting requirements by statutory instrument. That is appropriate, given the much more detailed and extensive accounting requirements that the Bill will impose. For example, it will facilitate the implementation of the seventh directive on group accounts, and it will give greater flexibility in the light of developments in that area to make adjustments to primary legislation.
Clauses 19 to 21 contain appropriate provisions for overseas and unregistered companies, and for the interpretation of part I.
If there is a controversial part to the Bill, it is part II, to which I now come. It deals with company and business names. The Government's policy on those matters is clear. With upwards of 800,000 names now on the register and more than 2·5 million searches per annum, any Government were bound to consider ways in which the system for company registration could be amended to reduce the call on public resources, while retaining reasonable safeguards for those who had registered a name.
The extent of the subjectivity in the exercise of his functions by the Registrar may have been feasible in earlier years when the number of registrations and searches was much fewer. It has now become impossible to operate. A shift to great objectivity has become not only desirable in order to reduce the demands on public resources, but essential if we are to have the effective and consistent system of registration that all concerned desire.
There are about 170,000 applications a year for either new names or changes of name. That represents a huge volume of work. At present every name has to be approved on the basis of a set of subjective criteria. It is an almost impossible task, the scale of which was not envisaged when the Companies Act 1948 was originally introduced. It is easy to be attached to the present arrangements because they are there, but anyone who has had to operate them, and anyone who has tried to form a company with

a certain amount of urgency and tried to get approval of a name, will know that the present arrangements can be a serious obstacle and can cause serious delays.
Clauses 22 to 27 bring about this necessary greater objectivity, by applying clearer tests of what is and is not capable of being registered. The Government have undertaken in the other place to complement these provisions with additional measures to deal with an aspect on which concern has been widely expressed—namely, a new and administratively acceptable procedure to deal with the problem of "too like" names. We have invited observations on the form of such a procedure and expect to table appropriate provisions in Committee. I draw the attention of the House in this context to clause 25, which has been welcomed by charitable and other companies as it enables such companies not to include the word "Limited" in their names.
The Government have adopted a more radical approach to business names. Many commentators and organisations have expressed concern at the Government's decision to abolish the Registry of Business Names. I can understand that an institution that was created in 1916 has become familiar, and I know that the Registrar and his staff have earned widespread respect for the way in which they have tried to discharge their functions, but in many instances the expressions of concern do not take account of the present reality. First, there is the inadequacy of the current arrangements. Secondly, there is the impractability of putting a central register on an effective basis. Thirdly, there are the merits of the Government's alternative proposals, which in our view will enhance consumer and creditor protection, rather than the reverse.
The provisions in clauses 28 to 30 thus replace a demonstrably ineffective and unsatisfactory system with arrangements under which all qualifying businesses themselves will be required to display, or make available on demand to those with whom they are having business dealings, the sort of information which currently many businesses are failing to file with the Registrar of Business Names. We shall no doubt debate these matters vigorously, but I must make it clear to the House that the Government stand four-square behind their proposals, for which they believe they have an overwhelmingly good case on merit.

Mr. John Smith: Will the Minister give the House some information on the financial and manpower implications of both these changes in respect of company names and the abolition of the Registry of Business Names? How many civil servants' jobs does the hon. Gentleman expect to save if the Government abolish the Registry of Business Names? The figure given in the explanatory and financial memorandum is 91. There is a reference to a saving of £1 million. Will the hon. Gentleman divide the £1 million between the company name provision and the Registry of Business Names?

Mr. Parkinson: The manpower savings are about 3:1—namely, three in the Registry of Business Names to one in the companies division. The financial savings would be apportioned in a roughly similar fashion.
We must understand that the present arrangements give a spurious certainty. The arrangements do not work. We know that there are a substantial number of defunct companies or organisations on the register. We know, too,


that there are many who do not bother to register. We have a strong suspicion that those who do not bother to register are those who are committing frauds and abusing the system. It is a mistake to think that we have a system which is working and which will be thrown away if the Bill is enacted in its present form. Our principal objection to the present system is that it is ineffective and that it gives the appearance of certainty when in reality it is an uncertain instrument.

Mr. John Page: I am grateful to my hon. Friend for allowing me to intervene. I do not want to spoil the easy flow of his discourse. Has he dealt with the disclosure of directors' names on a company's writing paper? Does that arise in this part of the Bill? If it does, will he mention it? It is an important matter.

Mr. Parkinson: I should be happy to describe in detail the arrangements that will replace the registry. However, I know that my hon. Friend the Under-Secretary of State will deal in more detail with the proposals when he replies to the debate. He has been very much involved in these matters, and I think that my hon. Friend will probably receive a more satisfactory answer from him.

Mr. Ivan Lawrence: What would it cost in terms of registration and search fees to remedy the deficiencies which it is acknowledged exist in the Registry of Business Names? Has consideration been given to the additional costs that might be involved in rectifying the deficiencies?

Mr. Parkinson: We estimate that the cost of making the present system work would involve increasing the fee of £1 to £5, and the fee of 25p to £1. That would merely make the present system viable. It would not make it work. It is virtually impossible to enforce a nationwide registry of the sort that the Registry of Business Names purports to be. We know that 40 per cent. of the inquiries that come to the registry lead to the discovery that the information that is available refers to a defunct organisation or that the organisation in question has not bothered to register. It may be said that about 40 per cent. of those registered have registered inaccurate details or have not registered when they should have done.

Mr. John Smith: It is not clear on what evidence the Minister's assertions are based. He has said that about 40 per cent. of companies fail to register. Information has been given in another place that about 80 per cent. of companies comply with the present system because the banks require them to do so. What scientific analysis has been made by his Department of how the Registry of Business Names works? If there are deficiencies in the present system, would it not make more sense to put them right rather than to abolish a protection for consumers and others?

Mr. Parkinson: We know that about 40 per cent. of the inquiries received by the Registry of Business Names turn out to be abortive. The organisation to which the inquiry relates is either defunct or not on the register. We believe that it is neither possible nor necessary to maintain the present system. We contend that our new arrangements will do the trick. We say that it is not possible to enforce the present system. That was the principal reason that led us to take steps to get rid of it. As others sitting not 1 million miles away from the right hon. Gentleman will confirm, this is not a new debate. There have been changes

of heart. We have come to the conclusion after careful examination of the present system's performance and its usefulness that it gives a spurious certainty.

Mr. Clinton Davis: I am obliged to the hon. Gentleman yet again for his courtesy in giving way. With regard to the history of the issue, is it not a fact that the overwhelming opinion of professional and other bodies interested in the matter was tested in the Green Paper in 1976, and that in the 1978 Bill the Government decided that the right course was to reinforce and build up the registry? Is it not a fact also that there was no dissent from that proposition by the Minister when he was in Opposition?

Mr. Parkinson: While I do not dispute a number of things that the hon. Gentleman has said, the fact is that if action was needed to make the system viable and workable, nothing was done to achieve either of those objectives. Therefore, we have come to the conclusion that the registry is not worth retaining. We believe that the Government's proposals will give at least as good, if riot better, protection than before to those doing business with unincorporated businesses and with those not trading under their own name. I have no doubt that in the weeks ahead, we shall return to that issue on a number of occasions.
In part III we come to a different area of company law, namely, provisions dealing with the share capital of companies. This part comprises three sets of provisions, each of them of considerable commercial significance.
Clauses 35 to 41 deal with the somewhat esoteric but not unimportant question of what is known to the experts as merger and acquisition accounting. They have been brought forward in the light of very strong representations to the Government by companies, and by the representative legal and accountancy bodies, following the High Court judgment in the case of Shearer v Bercain Ltd. in February 1980. It was represented to us that in the light of the judgment, section 56 of the 1948 Act, which requires the creation of a non-distributable share premium account in certain circumstances, had a much more rigorous application than had previously been understood in legal and commercial circles. In response to these representations, these clauses provide relief from section 56 in certain defined situations, which cover most of the situations which the Government have been advised gave rise to concern.
We are, however, aware that the Confederation of British Industry has been consulting the Law Society and the Consultative Committee of Accountancy Bodies with a view to their jointly proposing a rather wider measure of relief from section 56 than is provided in these clauses. The Government will of course give careful consideration to any such proposal. It was indeed in recognition of the fact that there was not a definitive view of the matter that the Government provided in clause 41 for a power to give further relief from section 56.
Clause 42 replaces section 54 of the 1948 Act, which has been the subject of considerable debate for many years whenever company law has been considered. It was, for example, discussed in the report of the Jenkins committee of 1962. Section 54 prohibits, subject to certain exceptions, the provision by a company of financial assistance for the purchase of its own shares. Its purpose was to prevent the acquisition of companies in


circumstances where the acquirer could finance the acquisition only by reliance on the assets of the company itself. It has been generally accepted that this is a matter that requires some regulation both for the protection of the interests of creditors and shareholders and as a matter of public policy. In recent years, however, there has been increasing concern on the part of lenders that in the light of certain court decisions the section has in practice been unduly restrictive and inhibiting in respect of commercial transactions that should not be regarded as mischievous in terms of the objectives of the clause, and, indeed, are highly desirable on commercial grounds.
The clause seeks to redefine the prohibitions in a way which reduces the problems resulting from the court judgments by providing additional exemptions for transactions where the company's purpose, or principal purpose, is not to give assistance or where there is no material reduction in the company's net assets. Since the clause was tabled in another place the Government have received further representations from banks and other lenders that the clause does not deal adequately with their concerns. The Government are now reconsidering those representations.
I commend particularly to the House clauses 43 to 56, which will enable companies in this country to do what companies in most other European countries and in the United States can do, namely, purchase their own shares. I pay tribute to the devoted work over many a Companies Bill of my hon. Friend the Member for Mid-Sussex (Mr. Renton), who has sponsored that notion at regular intervals throughout the House. He can truthfully clain to have won a substantial argument.
The Government's Green Paper on that subject last year received an overwhelmingly favourable response, and it is clear that these provisions will be of real commercial value to many companies, and particularly small companies. They truly represent a milestone in the development of company law in this country. Of course, appropriate safeguards have to be available for creditors and shareholders, and we believe that these are contained in the clause through prescribed procedures for authorisation and requirements for disclosures.
Clauses 49 to 53 provide for a simplified procedure for purchases of own shares out of capital. That possibility was also aired in the Green Paper and generally welcomed. The facility to purchase own shares will enable many companies to attract capital that would otherwise be unattractive either to the investor or the recipient, or to overcome, without risking the stability of the business circumstances in which a major shareholding is for disposal, and will generally be conducive to the efficient deployment of capital in the corporate sector.
As a practising accountant, one of the problems that I used to find was the difficulty of getting outside investors to take a minority interest in private companies. There was also the difficulty of releasing from private companies investors who wished to withdraw their money when the company no longer had need of their capital. This proposal will open the way to easier access for small and medium-sized businesses to a new source of funding. The House would be wise to adopt those proposals. The Government put them forward with enthusiasm.
The title of part IV which is "Miscellaneous and Supplemental", is slightly misleading, as it conceals a

series of fairly important proposals. Clause 57 adds a new clause to part III of the 1980 Act, to implement a fourth directive requirement in respect of the treatment of development costs. That area has been open to abuse. The proposals in the Bill will reduce the possibilities for abuse.
Clauses 58 to 62, together with clause 71, strengthen and streamline the company inspection system in a number of respects. Clauses 63 and 64 will also increase the weapons available against company misconduct—clause 63 by strengthening the provisions under which persons may be disqualified from taking part in the management of a company, and clause 64 by extending the criminal remedy for fraudulent trading to situations other than winding-up.

Mr. Peter Emery: Why does it seem that in clause 63 the recommendation of the Jenkins committee on disqualification has not been carried out? In other words, a person who has been judged either by a bankruptcy court or by a Board of Trade inquiry to be unfit to manage is not one of the categories that can be disqualified.

Mr. Parkinson: One reason is that we believe that the Cork committee will come forward with proposals, so we would rather wait. There is a certainty about clause 63 that is to be welcomed.

Mr. Clinton Davis: Am I right in asserting that there is no provision in clause 61 for professional confidentiality in the protection of some information?

Mr. Parkinson: I am afraid that offhand I cannot answer the hon. Gentleman, but my hon. Friend will do so when he winds up the debate.
I stress that clauses 63 and 64 need in no way inhibit honest directors. To put it in layman's jargon, one would have to have fairly well-established credentials as a rogue before having anything to fear from the proposals.
Clauses 69 and 70 deal with a matter that has attracted some interest in the House—the disclosure of different classes of membership of companies and the rights attaching to them. Hon. Members have raised various problems from time to time, such as that of the Performing Right Society Ltd., which will be covered by the clauses. Clause 70 deals in particular with the position of companies without a share capital.
Clauses 72 will facilitate the disposal by the Crown or the Duchies of Lancaster or Cornwall of land and other assets which have been vested in them after the dissolution of a company.
Of the remaining clauses, I draw the attention of the House in particular to clause 76. When enacted, the Bill will be the fifth Companies Act in force. From the 1967 Act onwards, each amends and supplements earlier Acts. The position for companies, directors, their advisers, all who are interested in and affected by company law, in trying to establish and understand just what the law requires or permits is becoming more and more difficult. Company law can, in any event, rarely be straightfoward and readily understandable. As those who make the law, it is our duty not to make life more complex than is necessary for those subject to the law. The goal of a consolidated Companies Act, or Acts, is one that will be supported from both sides of the House.
The Government have taken two major steps to bring the achievement of that goal nearer. First, we have


appointed an experienced former parliamentary counsel to work on the preparation of a consolidation. The task is a daunting one, but I am pleased to report that the work is well under way. Secondly, in clause 76 we are seeking to ensure, without detracting from the parliamentary scrutiny which any such measure must rightly receive, that the consolidation is more than a relatively mechanical bringing together of what is now scattered among five Acts, but that, from the technical point of view, company law becomes, on consolidation, coherent and up-to-date.
I have outlined briefly what is in the Bill. There is one further major subject which the Government promised in another place to deal with in the Bill—the question of the disclosure of interests in shares. This is an important and complex question, on which the Government issued a consultative document last year. The Government last week published for comment draft clauses containing provisions to improve and strengthen many of the existing provisions in the 1967 and 1976 Acts dealing with interests in shares, including provisions to require disclosure of concert parties. It is our intention to table new clauses for the Committee stage in the light of comments received on these draft clauses.

Sir Graham Page: To whom did the Government send the clauses? Did they go to various associations, without coming to hon. Members?

Mr. Parkinson: The draft clauses have been circulated among about 100 bodies that we regularly consult, and copies are available in the Vote Office.

Mr. John Smith: Before the debate commenced I made inquiries at the Vote Office and was told that one copy was in the Library and none was available for hon. Members. If trouble has been taken to circulate copies to 100 interested bodies, some concern might have been shown by those who pass the legislation to send copies to hon. Members. It is wrong that hon. Members did not receive copies. I hope that the Minister will apologise to the House and take steps to get the matter put right.

Mr. Parkinson: I apologise to the House. We have taken steps to get the matter put right. Copies of the 20 clauses are now available in the Vote Office, and I wish the right hon. Gentleman every happiness as he reads them. They are extremely complex. They should be considered carefully so that we can give them proper attention in Committee in a few weeks' time. We were concerned to make sure that parliamentary colleagues had access to the clauses at the first opportunity. I am sorry that they arrived in the Vote Office only this afternoon. The right hon. Gentleman was right to point the matter out. The clauses will be tabled in Committee after we have received comments on the drafts.
We also expect in Committee to bring forward amendments to the 1980 Act to modify some of its provisions in the light of practical experience since the Act came into force—and that particularly applies to part IV.
My speech will have warned the House that the Bill is long and complex. It deals with a number of important matters. The Bill is technical and complicated, but we believe that it is worth while. I commend it to the House.

Mr. John Smith: I am sure that the House is grateful to the Minister for explaining some

of the technical parts of the Bill, although perhaps hon. Members on both sides of the House remain less than satisfied with his justification for part II.
Let me say at the outset how much we deplore the Government's recent technique in the framing and presentation of Companies Act legislation. In the Bill presented last year, new clauses were brought forward only in Committee, which is always an undesirable practice. The House should see what is proposed when it gives its approval in principle. Once again we are being presented with the notion of new clauses to be introduced in Committee, after the Bill has been through its preliminary stages in another place.

Mr. Anthony Nelson: The action was called for.

Mr. Smith: Indeed, it has been called for for some time, which is all the more reason for the Government to have presented the proposals at an early stage and included them in the legislation as it was framed from the beginning. I cannot but believe that it is reprehensible for Parliament not even to be presented at this stage with the proposed clauses. No hon. Member has had the opportunity to see the Green Paper, unless he has been extremely fleet of foot since the Minister made his announcement. Most of us were prevented from going to the Vote Office because we wished to listen to the Minister. One would need to be extremely capable to read and digest 20 complex clauses in such a short time, so we have to take them blind. It is a most undesirable way to proceed with legislation.

Mr. D. N. Campbell-Savours: Is my right hon. Friend aware that this is the second such occurrence in the past four weeks? When the Iron and Steel Bill was presented to the House, the Government introduced on Report what was effectively a new Bill in the form of a new clause. This incident is just as great a slight on the House.

Mr. Smith: I am grateful to my hon. Friend for reminding me that the incompetence in this Administration is not confined to one Department. However, I do not know where the responsiblity lies for companies Bills—whether it is with officialdom or Ministers. It would be a good idea for all concerned to decide that the next companies Bill has within it at the earliest opportunity most, if not all, the provisions likely to be considered by the House.
The Minister introduced a slight note of flippancy towards the end of his remarks on this topic. I remind him that what he is doing by way of consultation is basing it upon last week's consultation document containing the clauses, with the intention of tabling new clauses when the Bill is in Committee, and he wants comments by 15 June. In other words, the Government propose that there should be about a fortnight for consultations on these very complex clauses.
I remind the House that this is not an uncontroversial area. The concert parties provisions are extremely controversial, and I think that the House should look at them with great care.

Mr. Emery: Probably all right hon. and hon. Members will agree that the real point is that, when the Government decide to make amendments—perhaps pressure in another place is a good reason for making amendments—and when


a consultative document is produced, the Civil Service always seems to wish to exclude Members of Parliament. The consultative document is sent round the country and is not made available to the House of Commons. It is on that matter that we all wish to press the Minister.

Mr. Smith: I agree entirely. This is the sort of area where it might be useful to set up a Special Standing Committee to take evidence on some of these matters. I understand that practice has been followed with some recent legislation. It is a deplorable practice that Government Departments should seek to consult everyone in the country except Members of Parliament, who have to pass the legislation.
I move to the substance of the Bill many parts of which the House may wish to approach on the basis of giving the detailed provisions close scrutiny in Committee. However, there are two aspects of the Bill which are deeply controversial and, unless there is a change of policy by the Government on these matters, it will be the intention of the Opposition to seek to divide the House on the Bill since the two changes are unacceptable.
I refer to the two changes in part II. The first is the proposal to abolish the Registry of Business Names. The second is the virtual ending of the screening of names submitted for registration as limited companies.
I deal first with the abolition of the Registry of Business Names. Consultations have taken place over the years between Governments of different complexions and those concerned with the Registry of Business Names. On each occasion, the overwhelming response from all those concerned has been that the registry should be maintained. Once again representations have flooded in. No doubt hon. Members will have received representations from interested parties, including the professions, the CBI, industry, consumer groups and the National Consumer Council, all arguing that the registry should be retained.
In essence, the registry has a simple function. It allows the public and others doing business with certain companies the opportunity to find out who operate the companies by applying to the central registry.
The Minister maintained that the reason the registry was to be abolished had nothing to do with manpower or financial implications. I hope that he will forgive me if I am slightly sceptical about that justification. It would hardly do to argue that the abolition was justified on the basis of manpower implications, of course. The Bill will save only 91 civil servants and £1·1 million. The Minister says that that is to be divided roughly three to one between the Registry of Business Names and the Registrar of Companies. That means that about 60 civil servants will be saved by abolishing the Registry of Business Names and 20 odd by reducing the scope of the supervision of the Registrar of Companies. That is a very small number.
I suspect that as a result of the Rayner report, Whitehall or the Prime Minister demanded that each Department should offer a certain sacrifice by way of numbers of civil servants. I suspect, too, that the sacrificial goat offered by the Department of Trade was the abolition of the Registry of Business Names and some lopping of the numbers of those employed in the office of the Registrar of Companies. Whether justified or not, these numbers have to be offered. That is the way that this Government seem

to work. As a result, the ritual sacrifice was made and, after that, some justification was sought for the measures proposed in the Bill.
I invite the House first to consider the argument that the Registry of Business Names is not making money. There is no doubt a deficiency, but that is easily solved. The present fee for registration is £1, and the search fee is 25p. No one who has made representations on this subject would object to the fees being increased to £5 for registration and £1 for a search. The Minister himself confirmed that that would eliminate the deficit incurred at present by the Registry of Business Names.
The Government refuse to make this change. It was proposed in the 1978 Companies Bill, introduced by the last Government, which failed because a general election intervened. Why this Administration refuse to make the change I do not understand. It was unfair of the Minister to suggest that the previous Administration did nothing about the problem. They proposed precisely this solution—to increase the charges and thereby to remove the deficit. It was not the fault of the previous Administration that their tenure of office came to an end before that Bill became an Act of Parliament.

Mr. Parkinson: The Labour Government might have introduced it earlier.

Mr. Smith: If the accusation is that the Labour Government did not take action earlier to save the Registry of Business Names, they should at least be given the credit for attempting to do it when they did, for not contemplating its abolition, as the present Government seem to do, and for indicating clearly that they approved of the principle of having such a Registry.
We are told by the Minister that the registry does not work and that there is no point in having a registry. It is odd how everyone consulted on the matter considered it useful to have it. Perhaps the Minister will identify any one person or body who has advocated the abolition of the Registry of Business Names. He cannot do so, because the professions, industry and the consumer organisations have all argued strongly that it should be retained. None of them has said that it should be a charitable function for which the taxpayer pays. All have said that they are prepared to pay for the service. In the circumstances, I do not understand how the Minister concludes that it is not a useful service when everyone who uses it thinks that it is. It is clear that the Government have made no scientific study of the matter. All the argument is based on mere assertion by the Minister.
The alternatives proposed by the Minister—he did not go into them in any detail—are that, instead of having a central Registry of Business Names, each company should show on its business note paper who runs it and should display a notice at its place of business saying who are the real owners or operators. These are sensible provisions, but they should be supplemental to the existing registry and not an alternative to it. How they will be more effective than the existing registry is hard to understand. Why cannot the Government merely adopt these useful ideas and use them as an additional support?
The Jenkins committee on company law reform reported in 1962, having given careful consideration to the matter. It recommended a substantial increase in the fees charged and also a small annual registration fee. It also recommended that the Government should take steps by


publicity and other means to ensure that the register was kept up to date. If the Government had good faith in this matter and wished to have better protection for the consumer, they would be seeking methods to strengthen the Registry of Business Names and not seeking to abolish it.
Despite the lame protestations of the Minister, I suspect that the real reason is that this is a ritual sacrifice to the proposition that, for good or ill, there should be a reduction in the number of civil servants. It is an ideological reflex action on the part of the Conservative Party. At a time of unemployment, it is extremely hard to understand why it should be thought desirable to dispense with the services of 90 civil servants engaged in useful work whose activities could be paid for by the people who use the services which they provide.
Under this Government, we have come to expect the view to be put forward that everything in the public service is bureaucratic and that every reduction in the number of civil servants must be desirable, whether or not there is a public saving as a result.

Mr. Nicholas Baker: Does the right hon. Gentleman accept that, according to his case, the bulk of the cost of a reconstituted registry would fall upon small businesses? How many small businesses has he asked whether they would be willing to support such expenditure? What would be the effect on those businesses?

Mr. Smith: A wide variety of people use the Registry of Business Names. Small and large businesses as well as many individuals use it. The CBI does its best to protect the interests of its small members as well as of its large members. It actively opposes the change in the Bill. In addition, the Law Society—with which, I believe, the hon. Member for Dorset, North (Mr. Baker) has a slight connection—vigorously opposes that part of the Bill. I imagine that the hon. Gentleman would not disagree with the proposition that solicitors have a fair knowledge of small businesses. It is significant that members of his profession should oppose the abolition of the Registry of Business Names.
I turn to the provisions that deal with the virtual abandonment of the screening of names submitted for registration as companies. It is a serious matter. The change is being made in order to save the jobs of, at the most, 25 to 30 civil servants. Instead of making some examination of the names put forward for company registration, and instead of offering some protection to those who subsequently trade and compete with those companies, those adversely affected will be forced to take an action of passing off or some other legal remedy at their own instance.
The Registrar of Companies performs an excellent service. He tells a person who applies to register a company whether the name is acceptable. There are many reasons why a name may not be. For example, a person might innocently propose a name that conflicts with the name of a company that is already registered. That person is totally innocent and has no devious intention. It is a service to that person and to the company that bears a similar name that the Registrar should point out that fact and refuse to register the names. Under the Bill I understand that there will be no real protection.
More seriously, some people seek to register names that are similar to those of companies that already exist. It

would be possible, for example, to use the name Esso or Shell or to name a company "Marke and Spence". All sorts of names might be thought up by the unscrupulous, who wish to trade for a short time and to confuse the public as to the company's true identity. Under the Bill the Secretary of State can act and after a six-month period of grace he can require the company to change its name.
Many dubious operators can make a quick killing within a short space of time. There should be some protection against exploitation of the provision. Six months might be a long time in such circumstances. There are other reasons why it is important to have proper public scrutiny of the names of companies. After all, those who trade as limited companies obtain certain privileges through the Companies Acts. Those privileges require that those who deal with such companies should be able to do so on the basis of trust. There should be as effective a form of public protection as can be devised to stop any exploitation of the privileges of the Companies Acts.
The Government have an aversion to Government-sponsored activity. However, we must be extremely careful when the Government act as a regulatory body or as a police authority, and where they carry the responsibility for ensuring that legislation is properly enforced. Any derogation of that responsibility is most serious. Therefore, I hope that the Government will seriously consider—both during this debate and in Committee—changing their mind about the abolition of the Registry of Business Names and the screening of company names.
The Government still have a substantial companies Bill without those provisions. In the other place the Government lost a vote in Committee. However, they were so addicted to the proposals that they used their majority to reverse that decision on Report. I hope that all hon. Members will be prepared to look at the arguments objectively. I hope that they will also read those clauses which, so far, the Government have prevented them from reading. They will have to do some fairly smart reading.
When the Bill returns to the House, I hope that sufficient time will be allowed on Report for hon. Members to consider the principle that lies behind the clauses on the issue of concert parties. If that is not debated on Second Reading, and if the Government's intentions are to be vouchsafed only to the Committee, it is an elementary point that we should have a longer debate than usual on Report. In that way, we could give the matter "Second Reading" consideration. After all, the provisions relating to concert parties are contained—according to the Minister—in 20 complex clauses. The average Bill contains that number of clauses and would be entitled to a whole day's debate on Second Reading. Therefore, I hope that there will be an extensive debate on that matter on Report.
I am sure that the Bill will be examined in detail in Committee. It has important implications for the accountancy and legal professions and for industry and business generally. We accept one or two provisions without qualification as desirable and sensible reforms. I much approve of clause 76, which allows some consolidation, under proper parliamentary supervision, of the rash of companies Bills that have come forward. It is important for those concerned that there should be one companies Act containing all the provisions. That sensible and intelligent device is incorporated in clause 76.
I hope that the Government will consider those two important and controversial matters. In addition, I hope that Conservative Members will not hesitate—if they are persuaded by the arguments—to show their independence of the Government. If they were to do so, a serious change—which is adverse to the interests of industry, commerce and the professions—could be avoided. Above all, the Government should not neglect their resonsibilities to consumers and to the ordinary public who deal with such companies. Those of us who consider the Bill from that point of view will regard the abolition of the Registry of Business Names and the changes in the Companies Act with the greatest of disfavour. Because of those blemishes in the Bill, the Opposition intend to divide the House tonight.

Mr. Anthony Grant: The right hon. Member for Lanarkshire, North (Mr. Smith) gave a grudging response to an extremely good Bill. Indeed, because of his previous ministeral experience in his heart the right hon. Gentleman knows that the Bill is satisfactory. I do not share his passionate enthusiasm, or the new-found love that the Labour Party seems to have acquired, for that great body, the Registry of Business Names, but even if I did I should not have thought that it would justify opposing the Bill on Second Reading. It is a matter that can be dealt with in Committee.
This is one of those happy, but all too rare, occasions when compliance with a Community directive happens to coincide with common sense. Therefore, the measure must be commendable from that point of view. I welcome the Bill because it embodies two provisions that both the Conservative Party and I have long advocated. First, it lifts some of the burden from the backs of small companies. Equally, it strengthens the law as it applies to large public companies, by increasing the disclosure requirements and the powers of investigation. Those two measures have long been necessary.
As regards small companies—which I strongly support—it is unfortunate that some of our most enterprising, energetic and enthusiastic young people are moving into the black economy. They opt out of the conventional system. On the whole, they do so because of the burden of taxation and the complexities of security and the Welfare State. In addition, the over-complex provisions of company law as it relates to small and new companies have acted as a deterrent against operating within the system and encouraged many of our best young people to work outside it.
In passing, I say to our Minister with responsibility for small firms—I wish that he would listen to such comments—that there are still far too many forms and there is far too much bumf for small firms to concern themselves with, even under the present Government.
It is necessary to make it easier for the enterprising to work within the system and to form companies and use company law as the basis of their operations. As it stands, the law is inhibiting in that respect. Many new companies are husband and wife concerns. The board meetings are held over the breakfast table. It is absurd that they should be subjected to all the panoply and the complexities that apply to much larger organisations. I agree with my hon. Friend the Minister when he says that they need an

auditor—that is for the good of their company and their ease of operation—but, by and large, it should be sensible to relieve them of some of the burdens that give comfort and welfare only to the accountancy and legal professions. Therefore, I welcome those aspects of the Bill.
I welcome also the long-overdue provisions whereby a company can acquire its own shares. My hon. Friend was right to pay tribute to my hon. Friend the Member for Mid-Sussex (Mr. Renton), who was a pioneer in this respect. He influenced such great organisations as the Wilson committee on the City, which also took up the cause. These provisions are very much overdue.
Equally and oppositely, in so far as the Bill tackles larger companies and public companies, it is to be welcomed. Like many hon. Members, I have not had a chance to study the complex clauses that are to be moved in Committee. I think that we should accept the Minister's apology for the fact that they came late and that others had them before us. If they deal with some of the scandals that occur within the City and our operations at present, they must be welcomed by the House.
There is no doubt that the rewards to be obtained from fraudulent or near-fraudulent manipulation of shares in public companies make the proceeds of the Great Train Robbery seem like peanuts. All too often we see this happening. When confronted with skilful operators, the speed of whose hands deceives the eye, our present arrangements and procedures for investigation are far too ponderous and cumbersome. Therefore, the additional powers to be given to inspectors in this respect are to be welcomed. Inspectors are either too late with their conclusions and the bird has flown when something has happened, or they are too inhibited by the existing arrangements. Therefore, the proposals are to be recommended. If these clauses cause greater disclosure and greater powers of investigation, they are vital if commercial confidence is to be maintained in a free market economy.
I come to what were described by the right hon. Member for Lanarkshire, North as the controversial aspects of the Bill. First, on the question of company names, as I understand it, the passage of the Bill will mean that we shall no longer require the Registrar, or the Minister above him, to determine whether one name is too similar to another. This is an enormous task. In my professional experience, it often causes unnecessary delay. I cannot see why it should be such a splendid responsibility for the Government, in the shape of the officials at the Department of Trade, the Registry of Business Names or the Minister, to have to compare 60,000 new applications each year—[Interruption.]—I am told that the figure is 170,000; it has risen—with the existing 600,000 companies on the register. That seems to be a remarkably futile exercise on the part of civil servants, because there is provision in the Bill for companies or persons to object if the names happen to be too similar. It is far more sensible for the law to be operated in this way than for civil servants and Ministers to carry out this duty.

Mr. Parkinson: Perhaps a further measure of the waste of time is that of the 140,000 applications that are approved for changes, 70,000 are never used and are made to no purpose.

Mr. Grant: I am grateful to my hon. Friend for making that matter even clearer. The provision is justified.
There is a provision in the Bill that enables the Minister to refuse a name if it is considered to be offensive. I think that in previous legislation the word used was "undesirable". Will the Minister explain the subtle difference? I might seek to form a company called "The Cecil Parkinson Appreciation Society Limited". That might be undesirable. On the other hand, I might want to form a "John Smith Condemnation Society Limited", which would possibly be offensive. I should like clarification of that.
I am well aware of the controversy over the Registry of Business Names. It is sensible for us to remind ourselves how this legislation arose. As I understand it, in 1916, at the height of jingoistic war-time fervour, people in this country were concerned lest Herr Schmidt should trade, rather disgracefully, under the name of Smith and thereby undermine the war effort and the will of the people to resist the German menace. That was a long time ago. Since then, in my professional experience of dealing with small companies for about 20 years, I have found it of remarkably little value. I understand that all these great and good bodies have erupted and have affected the minds of the Opposition, but it would need much more explaining than they have done for me to consider that it was a matter that was worth going to the stake over in order to reject the Bill so as to keep the registry.
The latest epistle that I received from the Consumers Association said:
If the Register is abolished, an important source of valuable information will be lost for the business community, for customers, for those involved in the enforcement of the law, and for journalists concerned with business affairs.
We need not weep tears over journalists. They are far better at winkling out information than any register or Government body can be. I do not understand the great value of this organisation. It is virtually no protection against dishonest traders who do not comply with it anyway. No one in his right mind gives large credit to vague, woolly trade names, whether or not they are registered. People always insist upon individual guarantees. If I were asked to give credit to the Wonderful Trading Corporation, the first thing that I would want to know was who the individual was. I might find out about the individual in the registry, but if I did not have a registry I should not give large credit to the Wonderful Trading Corporation without seeking some separate guarantees. Therefore, I cannot see what additional asset this provision gives.

Mr. John Smith: Perhaps the hon. Gentleman would be good enough to explain why, if a service is provided and those presently using it wish to continue to use it, and are willing to increase the amount that they pay so that it costs the taxpayer nothing, there is any sense in abolishing it?

Mr. Grant: I think that they delude themselves. That is my point. I was referring to the Consumers Association. It exaggerates any advantage that exists in simply knowing that Mr. Smith operates as the Wonderful Trading Company. What on earth does that tell one? It gives one no advantage or credit security. I might well be in a minority on this issue, but it merits much further investigation and argument in Committee. I have heard no justification for keeping this provision in the Bill.
Let us not exaggerate the savings involved. This is not something at which one just turns up one's nose. There is

no purpose in having a number of civil servants and spending a considerable sum unless there is a genuine need—not just that people think there is a need. Therefore, I support the Government's proposals in this respect. Although I can understand the matter being argued further in Committee, it is not a reason for opposing the Second Reading.
I welcome the consolidation provisions in clause '76. If, as I believe, they will simplify the law, they must be welcomed by everyone. I looked quickly at "Halsbury's Laws of England" and, as far as I can gather, there are 16 statutes, going back to 1867, that we are supposed to understand. Any simplification must be welcomed.
One of my lecturers used to say that a Chinaman who landed at Dover without being able to speak a word of English was expected immediately to understand 1 million decided cases, several hundred volumes of statutes and 100,000 statutory rules and orders. Everyone in this land is expected to know all that. The only exceptions are Her Majesty's judges, who have the Court of Appeal to put them right.
I am concerned that one recommendation of the Jenkins report of 20 years ago has been shelved by successive Governments who have jibbed at taking action to prevent directors who are found to be unfit to conduct companies and whose companies go into liquidation from fitting from one company to another. That point was brought out in Miss Esther Rantzen's great television programme last night. I understand that we are awaiting the results of the Court committee, but if nothing emerges before the Bill becomes law it is likely that we shall have to wait another 20 years before the matter is tackled. I hope that either something will be done in Committee or the Court committee will be asked to report on that matter before the Bill becomes law.
Subject to that, I welcome the Bill, because it will simplify the law, reduce fraud, stimulate small companies, increase commercial confidence and save some money and some Civil Service jobs.

Mr. J. Grimond: I support the hon. Member for Harrow, Central (Mr. Grant) in welcoming the promise of consolidation, though I am not sure that he is right in saying that the Bill will make life easier for small businesses. I get the impression that company law is becoming steadily more complicated. In the old days, Governments used to produce a major Bill on company law once every 20 years or so. Such Bills appear now to be annual events, though I am glad to hear that that may stop.
I have reservations about the Bill, but it has some good points. One is that it will allow companies to buy their own shares. I wish to take up the Minister's comment that one of the purposes of the Bill is to encourage enterprise. I am concerned about the possibility of developing a new structure in industry, and I should like to use the Bill to give further encouragement not only to profit sharing but to the ownership and control of industries by those who work in them. I am not talking about compulsion and I do not suggest that job ownership by individual workers should be the only structure in industry. But we need new ideas in industrial relations, and job ownership is one way forward.
I declare an interest as chairman of a small, non-profit-making organisation called Job Ownership Ltd., of which


Robert Oakeshott is the director and moving spirit and which exists to promote worker-owned businesses. I hope that before the Bill becomes law it will contain statutory recognition of job-ownership companies. If we are to have new clauses, such recognition would be a most useful subject for a new clause.
Lest it be thought that that is a theoretical proposal by well meaning but incompetent Liberals, I should point out that in another place it had the support of members of all parties and of highly-experienced business men. An amendment to give statutory recognition to job ownership was moved by Lord Seebohm, a former vice-chairman of Barclays Bank and former chairman of the Industrial and Commercial Finance Corporation. It received widespread support, including that of Lord Caldecote, the present chairman of the ICFC, Lord Boyd-Carpenter, Lord Lloyd of Kilgerran, Lord Halsbury, Lord Diamond, Lord Rochester, Lord Oram and many others.
Indeed, the Government were not wholly hostile to the idea. Speeches, to some extent sympathetic, were made by the Lord Advocate, and, in another debate, by Lord Gowrie. The promoters of the idea have also received a certain amount of good will from Ministers in various Departments, but so far they have refused to incorporate the necessary provisions in the Bill, largely because they say that they are not necessary. I will return to that point.
At present, I am attempting to nudge, cajole and push the various Departments concerned towards my objective, and that is no easy task. Our institutions are indeed odd. The Department of Trade has formal responsibility for company legislation. However, I am advised that the Department of Trade would find it easier to move if the Treasury pushed it. But who is to push the Treasury? The answer is the Department of Employment, which is certainly interested in the extra jobs that job-ownership companies, no doubt partly financed by redundancy payments, could create. I draw attention to the speech made in another place by the eminent patent lawyer Lord Lloyd, who pointed out the importance of job ownership in his work in encouraging groups of skilled men to exploit their own inventions and set up their own companies.
Mr. Oakeshott has suggested that we are engaged in a form of billiards—propelling the Department of Employment on to the Treasury with sufficient force to pot the Department of Trade, taking care—to change the mataphor—that we are not snookered, as we have been up to now, by the Lord Advocate.
I have a powerful ally. In a letter to Senator Russell, which is now part of the Congressional Record, the Prime Minister wrote in August 1979:
I am convinced that by increasing the commitment of employees to the financial well-being of their company … employee share ownership schemes can make a significant contribution to improving productivity and consequently profitability.
The scheme has obvious advantages. As Lord Seebohm pointed out, it will get rid of management by confrontation. It will promote the better distribution of wealth—a step which is essential if we are to preserve freedom and interest more people in higher productivity. Further, as Lord Seebohm also pointed out, it will diminish industrial absentee ownership and encourage, in Lord Caldecote's phrase, a "company-owning democracy".
I do not believe that the only choices before us are State Socialism, the collective ownership of businesses and industry by organisations, or narrowly-based capitalism. When I hear the undoubted advantages of capitalism extolled, I ask myself how workers will react to the praises sometimes showered upon it, particularly by this Government. May they not sometimes feel, as do black Africans when listening to Mr. Botha saying how splendid democracy is, that they are being asked to believe in the virtues of clubs that they have little chance of joining? The success of worker ownership in the enterprises centred round Mondragon has been widely acclaimed and publicised. Is it not time that we attempted to repeat that success in this country, with due modifications to suit our circumstances?
A job ownership company should be basically owned and controlled by those who work in it. There must be flexibility in the details of the scheme. I accept some of the criticism made of the proposals offered to Lord Seebohm's amendment in another place. I feel, however, that those proposals could be adjusted. The essential factor is that those who work in the company should control it. There should be adequate safeguards against abuse of such a scheme by those who are not using it for its true purpose.
As I have said, objection put forward by the Government in another place was that job-ownership companies can be set up under existing Acts. That is true. One such company, Manchester Cold Rollers, has recently attracted a considerable amount of publicity. I would ask the Government to listen not so much to politicians but to experienced members of the House of Lords who have addressed their minds to the matter. They include not only business men but also lawyers and accountants.
Lord Seebohm pointed out that local lawyers and accountants would be chary of recommending this type of company unless it received legal definition. It was pointed out by Lord Boyd-Carpenter that these Bills are not easy to understand. Small companies that all apparently wish to help to promote are not always able to engage experienced and specialist advisers. Nor can such advice be provided by local solicitors and accountants.
Co-operatives will receive welcome relief under clause 25 of the Finance Bill. However, reliefs cannot be extended to job-ownership enterprises until these have statutory definition. The difference between a co-operative and a job-ownership company is that the owners of the latter share in the growth of its assets. At Mondragon, those who retire receive not only their pensions but lump sums which can at the moment amount to about £20,000. This is highly desirable. I would have thought that it would appeal especially to the Government. In a co-operative, however, that procedure cannot be followed. No doubt, both forms of organisation have a part to play. Unless job-ownership companies register under the old Industrial and Provident Acts, thereby becoming co-operatives or closed companies, which is extremely difficult for companies of any size, they cannot qualify for the benefits.
I would have thought that this Government in particular and the House in general would wish to encourage anything that means that management and men share the same interests and that they work together. We have learnt, on the authority of the Prime Minister, that that is what the Government want. One means of moving towards its achievement, according to those able and experienced business men and fellow peers in the other place—I accept that it may not have universal application—is to give


statutory recognition to job-ownership companies. Those same peers also indicated that although it is technically possible to form such companies under existing law, they would not attract the tax advantages available under the Finance Bill, and it would be difficult for many such companies to be formed.
I am at a loss to know why the Government have resisted what I proposed. They have produced the good but strange offer of providing a foreword to a pamphlet indicating the excellence of these companies. Such a foreword is to be welcomed if well written by a competent Minister. It is, however, no substitute for legal recognition.
I hope that the Government will give way to their better instincts. If their intention is to produce a large number of new clauses to the Bill, a clause along the lines I have described would surely be a suitable candidate. I trust that hon. Members will be able to return to this matter in Committee. I hope that if and when the Bill becomes a statute it will contain statutory recognition for this class of company.

Mr. Anthony Nelson: It is always an honour to follow the right hon. Member for Orkney and Shetland (Mr. Grimond), who brings to the debate a breadth of experience that all hon. Members welcome.
I should like to refer to certain aspects of the Bill that have aroused my interest, especially the provisions relating to concert parties. I join my hon. Friend the Member for Harrow, Central (Mr. Grant) in the generous welcome expressed for the Bill. It appears to be a well drafted Bill which delivers to the House provisions for dealing with problems that have aroused criticism over many years. I am proud to be associated with the party and the Government that have tackled these problems. I should also like to pay a personal tribute to my hon. Friend the Under-Secretary of State for Trade. Many hon. Members are aware of the immense work and time that he has devoted to the drafting and consideration of the Bill. We congratulate him.
I welcome the removal of the restriction on the purchase of shares in part III. This will enable companies to decline as well as to grow in size. It has always seemed a strange anomaly that company law assumes that corporate and limited entities are immortal. Companies should be able to die out as well as to spring up. It is not necessarily a reflection of their lack of profitability or their inadequacy that a company, its directors and shareholders, should decide at an appropriate stage that it is better to decline in size than to grow.
There are burdensome and unnecessary restraints on the ability of a company and its shareholders to decline in size. The provisions contained in the Bill will assist these companies, especially small companies. I have some detailed doubts about the provisions relating to this matter. The restrictions on the sources of finance to purchase shares, particularly the predominance given to undistributed and accumulated profits, is restrictive on certain companies. It should be possible to provide such finance from capital generally. The requirement for a special resolution of shareholders in certain cases seems a little restrictive and may deter a number of companies from buying their shares.
I welcome the proposals for changing and simplifying the requirements for accounts and disclosures. These

changes will enable an abridged balance sheet, instead of a profit and loss account and a directors' report, to be presented. I understand that this proposal will assist over 500,000 companies. The modified account provisions for medium-sized companies are also to be welcomed.
Standard requirements for disclosure in Europe and, indeed, in this country, do not themselves necessarily bring about standard quality of disclosure. I have read some German accounts. Consistently, one of the largest financial provisions in profit and loss accounts of even major public quoted German companies is a provision called "Miscellaneous", which usually appears right at the bottom. There is no indication in either the profit and loss account, or in the accompanying notes, to explain how this large sum of money is made up.
In this country we tend to play the game both in the accounts and in the notes. There has been a considerable improvement in recent years in the standard of disclosure by companies. Although we may be moving towards standard disclosure requirements in Europe, we shall not necessarily gain standard quality of information. I hope that through our membership of and association with the Common Market we shall be able to press for measures to ensure that the quality of information is standardised in Europe. I understand that the provisions in the Bill are as wide as the directive allows. I hope that the directive can be extended, thus enabling accounting provisions and requirements to be simplified to a greater extent in subsequent Companies Acts.
The part of the Bill that arouses my greatest interest is that dealing with concert parties and the draft clauses contained in the consultative document published on Saturday which was, incidentally, available to hon. Members well in advance of the start of the debate. I obtained a copy from the Vote Office.
The background is well known to hon. Members who took an interest in the appalling circumstances surrounding the dawn raid on Consolidated Gold Fields at the beginning of 1980. Some hon. Members will be familiar with the circumstances, but it is worth recounting what happened.
In October 1979 De Beers began buying shares in Consolidate Gold Fields through a number of associated companies. It was careful to ensure that each of the companies did not acquire more than 5 per cent., as in so doing it would be required to disclose that holding under section 33 of the Companies Act 1967. A number of the companies involved bought 4·99 per cent. of the shares. I do not believe that that was entirely coincidental. There was, therefore, no disclosure as required under section 33. However, in one case a company accidently went over the 5 per cent. mark without declaring that interest.
The purchases were done initially and subsequently on the direction of Davis Borkum Hare, the brokers for De Beers in Johannesburg, through one of the largest and well known broking companies in London, Rowe and Pitman and in consort with one of the largest jobbing firms, Akroyd and Smithers. The broking company in Britain, Rowe and Pitman, left blank the transfer forms on which the shares in Consolidated Gold Fields were acquired. As a result it was able to circumvent the requirement that the shares should appear on the register of Talisman— the computer transaction system of the Stock Exchange.
As a result of leaving the share transfer forms open, Akroyd and Smithers was able to apply to the chief executive of the Stock Exchange for the details not to be


included on Talisman. The chief executive acquiesced to that request. Subsequently Consolidated Gold Fields realised that a substantial shareholding and possible controlling interest, in that company, was being built up. It is one of the biggest quoted companies in Britain, with major interests in construction through the Amy Roadstone Corporation, and international interests in mining.
Consolidated Gold Fields applied to the Stock Exchange for an investigation into who was acquiring that interest. The deputy chief executive of the Stock Exchange refused to investigate. Subsequently the Stock Exchange set up a committee to investigate proceedings and the way in which the shares had been acquired. It concluded that the chief executive and the deputy chief executive had not acted improperly in making their decisions.
I wish to make it clear that I have no reason to believe that they acted outside Stock Exchange rules or, indeed, the law of the land. However, in my judgment all the indications are that there was an error of judgment on both cases. Furthermore, in my judgment it is wrong that the Stock Exchange should set up a committee to inquire into the activities of its chief executive and deputy chief executive and, some might say not surprisingly, exonerate them in such circumstances. One way or another, a substantial shareholding in that major company was built up without the market or the share register knowing the owners.
On 12 February 1980 Rowe and Pitman was instructed to increase the holding of Consolidated Gold Fields shares from 14 to 25 per cent. in the market. The jobbers were briefed at 9.20 am and were told that they could offer a maximum price of 615½p. The market opened at 9.30 am with a bid price of 615p and an offer price of 618p. The bid price made by Rowe and Pitman was therefore slightly above the market level. By 9.50 am it had purchased 16½ million shares in Consolidated Gold Fields.
It is interesting that not only were a large majority of the shares purchased at 615½p, the preferential market price over and above that offered to many other shareholders, but that, of the 16½ million shares acquired, 13½ million came from private clients of the brokers and institutions that they had approached, presumably involving a substantial commission to Rowe and Pitman.
The jobbers sold 1.2 million shares short, knowing that the price being offered was above the market price. They sold shares that they did not actually own, hoping that subsequently they could buy them at a lower price. Clearly there was a risk, in that the market price could move both ways, but it subsequently moved downwards and the jobbers, too, were able to take advantage of their special knowledge in selling short and making a considerable profit.
In this action a substantial number of shareholders in Consolidated Gold Fields were deprived of the opportunity of offering their shares at a preferential price. The acquisition was made covertly and was designed to give the least possible opportunity for others to bid up the market price even higher.
No rule or law was broken at that time. That event and subsequent dawn raids gave rise to pressure by many hon. Members and other commentators for a change in the law. The Stock Exchange gave the brokers concerned a mild rap on the knuckles for not telling the Scottish jobbers who made a market in Consolidated Gold Fields shares what

was happening. Akroyd and Smithers was criticised for selling short and for offering different prices. It was however a mild, timid and inadequate report which did not go as far as many would have liked to ensure the keeping of the City of London's reputation for high standards of integrity and fair practice.
Subsequently, I met the chief executive of Consolidated Gold Fields to discuss the matter. I had an interest, as did a number of other hon. Members. We expressed it in the House at the time. I wrote to the Council for the Securities Industry, which was considering changes to deal with the problem. It imposed a temporary ban in August last year by requiring a general tender where acquisitions in excess of 15 per cent. were purchased. The Department of Trade subsequently published the first of its consultative documents on the matter.
I congratulate the Government on drafting the provisions and on finding time to include them in the Bill. I understand the technical difficulties that have been encountered in striking the right balance. Clearly, whatever percentage is set or whatever restrictions are placed on the ability of people to acquire shares in a certain way, there is a risk of making a free market less free.
On the other hand, the Government and those involved in the securities industry have an obligation to ensure that the free market is a fair market. If it is not fair it cannot be free for long. A basic criterion when considering provisions in the consultative document published on Saturday is whether they are a sufficient deterrent to dawn raids of that kind. I welcome the provisions as far as they go, but is my hon. Friend satisfied that they act as a sufficient deterrent? Most of the provisions seem to be concerned with disclosure after the acquisition, rather than with legislating for sufficient penalties to ensure that people are put off such acquisitions in future.
I think in particular of Dunlop, another of our major companies. Shareholdings appear to have been built up by certain interests in the Far East and, according to reports, in Malaya in particular. It has not been possible for the company, or for anyone else who has undertaken an investigation, to find out who is building up a potentially controlling interest in that major British company.
Given that now and in the future many dawn raids or other operations for buying shares might be mounted outside Britain, we must consider not only whether our legislation is sufficient to deal with the people who play by the rules here, but whether it should also put off people who operate in a different corporate climate in other parts of the world.
It was suggested, therefore, that those who acquire shares in this way and do not disclose the interest that they have as required under British law should have their rights to dividends and voting rights stripped from them. The consultative document, as I understand it, stops short of that. Although a freezing of those rights is permitted, the draft clauses propose that the ending of that freezing should be less easy than it has been in the past.
I personally doubt whether that alone will put off a Far Eastern predator from acquiring an interest. Once shares are acquired one knows that there are three rights to which one is entitled: first, the capital value of the shares; secondly, the dividend from the shares; thirdly, the voting rights of the shares. Even if such rights were suspended temporarily, and even if it were more difficult to get them back later, one knows that once one discloses one's


interest at a future date, having built up sufficiently large interests, one will be able to benefit from the dividends, the voting rights and the sale of the shares.
How will the provisions prevent companies in Lichtenstein and the Far East—where there is the use of nominees, far fewer registers, and more use of bearer shares for holding companies—from building up unacceptable interests, possibly controlling interests, in the largest British companies, many of which have strategic and important national interests? I am not satisfied that the provisions go far enough in that respect. However, I have not had the opportunity to consider them in great detail. That is a proper matter for consideration in Committee.
The opposite extreme is the case of British Petroleum and Selection Trust, where a major acquisition was undertaken by this large and pre-eminent oil company in one of the largest mining concerns. When British Petroleum wanted to acquire a controlling interest in Selection Trust, it announced the fact, it had discussions with the company and offered a price—a high, cash price, I believe. It was done in the best possible way.
There was no need for a company with the history and experience of De Beers to acquire a shareholding in a company such as Consolidated Gold Fields in such a covert way. It is proper for those of us who take a genuine interest in these matters to say in the House, in the hope that it will go back to the companies concerned, that some of us censure this practice and believe that the goodwill that a company such as De Beers has built up over many years has been substantially undermined by what it did on that day and previously. I hope that in the future the capital benefit that the company got from that transaction will be offset by a decline in reputation, which I believe it deserves as a result of shady and sharp practice in the acquisition of those shares.
It is sad to say such things, but perhaps it is necessary to do so with the privilege that we are extended in the House. Those of us who frame the law and act to some extent as trustees and guardians of fair practice and the rights of minorities—and, indeed, of minority shareholders—have a right to censure companies that act in this way, just as much as we have an obligation to congratulate those that contribute to our economy.
In conclusion, I give a warm welcome to the Bill. It will go a long way towards reducing the restrictive requirements on companies. It will enable companies to operate in a freer framework, in an atmosphere that was the object of our manifesto. The objects and provisions of the Bill are in line with the basic tenets of Conservative philosophy, and I believe that the measure has been well drafted. I wish it a fair wind through the House, and I hope that the Opposition will not press their objection to the Bill, because its overriding provisions are welcome to us all, and the detailed concern of some of us about certain provisions should be left to the Committee stage.

Mr. Ben Ford: I shall not follow the hon. Member for Chichester (Mr. Nelson), although I admire his frankness. From my commanding position as the sole Back-Bench representative of Her Majesty's Opposition, I was fascinated by his revelations.
I, too, broadly welcome the Bill, although I am sure that the Opposition will attempt to improve it in

Committee. I declare an interest as a member of the Amalgamated Union of Engineering Workers and of the Association of International Accountants.
Neither the Bill nor the fourth directive mention international corporations. In some cases, I suppose, they are supra-national corporations. The time is long overdue for a proposal from the EEC Commission on company law to enable us to deal with these mighty organisations whose communications travel across frontiers without let or hindrance and whose financial depredations can sometimes determine the fate of nations.
I follow my right hon. Friend the Member for Lanarkshire, North (Mr. Smith) in objecting to the abolition of the Registry of Business Names. I was not convinced by what the Minister said today. In my view, the proposal is a mistake. The registry needs to be reformed and put on a sound financial basis for the future. However, if the registry is abolished, an important source of valuable information will be lost for the business community, customers, those involved in law enforcement, and journalists concerned with business affairs. As a result, it will be far more difficult to control those traders who behave unsatisfactorily under one name and then change to a different one. I shall support my right hon. Friend in Committee on this matter.
I wish to refer specifically to clause 8 which seeks to create two new classes of companies, namely, small and medium-sized companies, and to go into the question of the qualifications of the auditors required to audit those companies. For some time I have been interested in obtaining the recognition of a body of accountants which is not yet recognised under section 161 of the 1948 Act. That section was originally intended to ensure a degree of competence in the auditing of public companies. Unfortunately, that has since been extended, particularly by the 1967 Companies Act, to include private companies. One must conclude, therefore, that the meaning and interpretation of section 161 of the 1948 Act has been extended. It has become an imprimatur without which no accountant or body of accountants can practise their profession to the full.
Ministers, through their interpretation of section 161, have turned the accounting profession into a closed shop. For some time the Association of International Accountants has been attempting to obtain recognition under section 161 of the 1948 Act. Under successive Ministers and Governments, the association has gone from one stepping-stone to another. Each time when it thought that it had satisfied the requirements, something else was found to block recognition.
Finally, in 1978–79, the association agreed to employ moderators who were nominated by the Department, some of whom, unfortunately, dragged their feet.
I have been in correspondence with the Minister about this matter. He was good enough to write me a letter prior to this debate, which is the exception rather than the rule, because in the past Ministers have endeavoured to delay their communications until the day of the debate or even until half-way through the Committee stage.
I suggested in my letter that the AIA should be allowed to audit small and medium-sized companies as defined in clause 8, which I believe would have been a useful way of moving towards full recognition under section 161. In any case, small private companies do not require Deloitte, Price or Kidsons—there are about 400,000 such


companies—to audit their accounts. Therefore, it would have been an extremely useful step had small and medium-sized companies been allowed to be audited by the AIA.
In his letter to me, the Minister stated that we should ensure that auditors have
an adequate level of training, knowledge and experience
and are
subject to appropriate ethical and technical standards.
He went on to make the case against two-tier qualifications, in line with the eighth directive. Although I have no particular quarrel with that approach, it seems to confirm the Department's slavish subservience to EEC direction from the Commission. I had some experience of that during a discussion on origin marking, when we were told by the Minister that we ought to watch our Ps and Qs in Committee because people from the EEC would be watching and listening.
However, clause 1(a) of article 51 of the fourth directive states:
Companies must have their annual accounts audited by one or more persons authorised by national law to audit accounts".
I therefore submit that under the fourth directive there is no imperative for the United Kingdom not to make its own arrangements for auditing. I contend that if the Minister were to recognise a body of accountants as eligible to audit the accounts of small and medium-sized companies under United Kingdom law, there would be no reason to infer that its standards were less than adequate in the broad context.
In his letter, the Minister speaks of technical and ethical standards. The disciplinary record of the body to which I have referred is excellent. If we examine a few cases where recognised bodies have been involved, we may come to the conclusion that perhaps they are not so shining white. There are many examples, from Rolls-Royce onwards, such as London and County Securities, Barrow Hepburn, Newman Industries, Lonrho and Stonehouse. One could go through a considerable list of cases where recognised firms of accountants have been criticised. Compared with those, the disciplinary record of the AIA stands out as an example of integrity and probity.
As to technical standards, I have received two letters within the last few hours from people who have been nominated as moderators for this body. The first is from Professor J. M. Samuels, Professor of Business Policy at the University of Birmingham. He sets out his terms of reference and says that he examined 14 of the examination papers of the association covering the examination diets held from June 1975 to June 1977. He continued to monitor the examinations through December 1978, and he states:
I am able to report that the syllabus and examination papers of the Association are at least as comprehensive as those of the recognised accounting bodies and that the standard of marking is also at least as stringent as that of the recognised bodies. To conclude, therefore, it is my opinion that the examination papers that I monitored were of a satisfactory standard. They were comparable in standard to those being set by the recognised professional accounting bodies. The marking standards of the Association are also satisfactory.
The second letter came from Mr. R. F. Griffiths, the senior partner of a prominent firm of chartered accountants. In it he said:
Having completed my moderation of certain specific papers as required of me by the Department of Trade in relation to the December 1978 sitting I confirm that in respect thereof the

syllabuses and examination papers were at least as comprehensive as those for equivalent subjects adopted by the Institute of Chartered Accountants in England and Wales, and that the standard of marking was of a correspondingly stringent nature. It is therefore my opinion that, in respect of the individual papers which I considered, the standard of examination adopted by the Association of International Accountants was similar to that of the Institute of Chartered Accountants in England and Wales with whose examinations I was conversant at that time.
In his letter, the Minister refers to practising certificates. I assure the Minister and the House that the AIA issues a practising certificate only after 30 months' practising experience. The ACA has about 20,000 members of whom only 1,700 are engaged in public practice and entitled to practise as public auditors. Fairly recently, 1,000 people were admitted to that body without an examination in public auditing, although possibly with some other qualifications. There is no other body in this sector—I say this completely dogmatically—for recognition under section 161. I shall therefore seek to move an amendment in Committee to allow for the admission of the body that I have mentioned for the purpose of auditing the accounts of small and medium-sized companies.
Over the years, it seems that there has been a conspiracy to maintain a closed shop in the accountancy profession, aided and abetted by the Department. I sincerely believe that the AIA has now earned the right to recognition. If progress is not made, there might well be a case for using all the resources of public relations and the national media to launch a campaign for the registration and regulation of the accountancy profession as a whole.

Mr. Robin Squire: When I contemplated speaking in the debate, I imagined having to make one apology at the outset to my hon. Friend the Under-Secretary, because a long-standing commitment will probably prevent me hearing his words of wisdom. However, I assure him that I shall read them.
I now find that I have a second apology to make, because I am a chartered accountant. As a result of the contribution of the hon. Member for Bradford, North (Mr. Ford) I feel as if I should apologise for the sins of a number of my colleagues. Without following the hon. Gentleman's argument, I assure him that if his case is as strong as he makes out, I shall do what I can to assist in granting the recognition that he obviously seeks.
I give the Bill a general welcome, because it puts right a number of omissions and problems that require amendment. I am sure that that is common ground on both sides of the House. I welcome in particular the action taken in respect of the dawn raid "concert party" exercise. I had intended to go into some detail, but I could not conceivably do so better than my hon. Friend the Member for Chichester (Mr. Nelson). I content myself by pointing out that anything which effectively discriminates against smaller shareholders and in favour of the larger battalions must be inherently wrong.
Those who support the concept of a share-owning democracy can do so only on the understanding that obvious abuses will be tackled and that the discrimination which means that those not in possession of the knowledge held by the big battalions will lose will be remedied and that such people will be protected as they are not now protected.
I welcome the reduction in disclosure requirements for smaller companies. When I studied for my qualification


the system involved discrimination and something called "privately exempt companies". That went the way of all flesh, as is the way. We can see a distinction between the large, multinational company trading either in many parts of Britain or the world and the self-employed builder or window cleaner trading from the street corner. There is clearly a distinction that must be recognised in the accounting requirements.
I make a small caveat to my colleagues on the Front Bench. I hope that they will resist the siren voices within my profession that seek to reduce dramatically the auditing requirements for smaller companies. It has been suggested that because small companies often consist of directors, who are also majority shareholders, provided the directors are satisfied with the accounts that is the end of the argument. I resist that suggestion because it overlooks the important responsibility owed to creditors and would-be customers, many of whom trade with those companies on the information supplied and filed at Companies House.

Mr. Clinton Davis: I am aware of the contentious nature of that argument. However, will not the hon. Gentlemen accept that for small companies—for example, a husband and wife fish and chip business—the value of the information is, to put it at its highest, a little questionable? Such information is always in arrears, and often substantially so. What value does that have for creditors?

Mr. Squire: I suspect that not only do I understand the hon. Gentleman's point, but that I have some sympathy with it. However, drawing on my previous auditing experience, any certification by an independent auditor who is unqualified, or even by one who is qualified in a relatively minor way, is better than a statement by the directors of a company that its assets and liabilities are as certified by them. That would be unacceptable. Without wishing to cast any doubts on the honesty of most of those who run such companies, there are undoubtedly a number who are not so careful about the manner in which they conduct their affairs. If directors' statements were to be relied on to any great extent, it would collectively reduce the standing of limited companies which would be of no great advantage to anyone. I urge my colleagues on the Front Bench to resist any pressure in that direction because the responsibility is not only to the directors and shareholders but to a wider entity.
I turn to two matters that are not covered sufficiently in the Bill. While recognising that it may not be possible to incorporate them in the Bill, I hope that they will be borne in mind in the preparation of any future legislation. As another speaker said earlier, we appear to be moving towards annual Companies Bills. The first matter arises from the way in which companies operate from the same address and constantly change their names. My hon. Friend the Member for Harrow, Central (Mr. Grant) said that that subject was featured in a television programme last night. He has an advantage over me, and my subsequent comments may show that I was not privileged to see that programme.
I have been concerned about the spread of the pernicious practice of a number of companies operating from the same address. I spoke about that issue in the Chamber recently in relation to plumbing. I know of an instance in the West Midlands where there were no less than 15 different company names operating from the same

address, each to be assumed as the moment was opportune and discarded as the pressure from various enforcement agencies, such as they are, grew. That must be an unacceptable practice. The only people who suffer are those unfortunate enough to engage such companies to carry out work. It would be foolish to allow much more time to pass without taking some legislative action to combat that practice.
While I recognise that the Bill takes some steps towards action against those who may be trading frauduently, the problem is the speed with which names may be adopted and discarded and the apparent immunity which many of - those concerned appear to have for a considerable number of months, if not years. I know that the Minister will say that the Government are awaiting the Cork committee report. I urge him to speed up that report. Should the Committee not touch on that issue, I hope that he will ensure that suitable provisions are introduced in any legislation that arises from the report.

Mr. Clinton Davis: Is it not surprising that the Government are resorting to the argument about having to wait for Cork when they have pre-empted Cork by asserting that they will abolish the Official Receiver service? Does not that seem inconsistent?

Mr. Squire: I do not wish to interfere in an argument between my colleagues on the Front Bench and the Opposition. The Government may have good reasons for waiting for the Cork committee report. The chairman of the committee is a person who, perhaps more than anyone in Britain, should be aware of the intricacies of bankruptcy, liquidation and possible reforms.
The second area that I wish to mention relates to the role of the Registrar of Companies. I have become conviced that it is a far too passive role. There is a danger that the office may be seen, if not as a rubber stamp, then largely as the recipient of an enormous mass of paper which is then filed, with the occasional chasing of some of the more elaborate, obvious and disgraceful exceptions to the law.
The Registrar rarely appears to pursue the more obvious points about omissions of common directorships, false company addresses and a whole range of other items with which I do not wish to bore the House at present.
Limited liability is arguably one of the reasons for the way in which a tradesman works and why the countries that have embraced that concept have shown such a major economic advance over the countries of Eastern Europe that have not done so. Indeed, it has enabled many consumers to achieve material gains which they would not otherwise have achieved. But it not only grants advantages; it must impose responsibilities. I fear that at times the balance has sometimes tilted a little against consumers and their ability to get proper redress against those operating on the fringe of economic activity. Unfortunately, there is no indication that that is reducing. Every indication from my correspondence points to those on the fringe, so to speak, acquiring a greater percentage of the economic activity in this country.
I stressed at the outset that I welcomed the Bill. I particularly welcome the statement by my hon. Friend that there will be legislation—he did not say when—which will attempt to consolidate our morasss of company legislation. As an accountant—I am sure that there are those in law, for whom I cannot speak, who would utter a similar view—I have always believed simplicity to be an


enormous advantage in any sphere. The more we put a wide range of legislation round our economic entities, the more we reduce their ability to employ many people, make profits and distribute the money to those who make the profits. The more we surround them with unnecessary legislation, the more difficult it will be for them to make profits. I trust that the statement made be my hon. Friend will ultimately be transformed into legislation by the Government in a future Session. I commend the Government for introducing the Bill today.

Mr. Richard Page: I shall confine my few remarks to the part of the Bill which will enable companies to buy in their own shares. It will enable private and close companies to have access to the marketing and purchasing of their own shares—a privilege which has been hitherto denied to all but the public quoted companies.
I have taken considerable interest in this matter. Last year, I introduced a Ten-Minute Bill which was unopposed. For that reason, I was disappointed to hear the right hon. Member for Lanarkshire, North (Mr. Smith) say that he proposed to divide the House this evening. I should hate such action to be interpreted as meaning that Opposition Members are against this provision in the Bill.

Mr. Clinton Davis: We reserve the right to criticise the proposals in detail, but that is not why we propose to divide the House. The reasons are connected with the modifications of the screening of company names and the abolition of the Registry of Business Names, apart from certain omissions from the Bill.

Mr. Page: I thank the hon. Gentleman for making that clear. But I believe that the objections that he has mentioned could far better be dealt with by amendments in Committee than by dividing the House tonight.
My support for this measure is founded on my belief that this country's future lies very much in the smaller business sector. The development of that sector can only be assured if there is adequate opportunity for investment to be introduced and withdrawn as and when the need arises.
This country is one of the few countries in the world which does not have the share purchase provision. The locked-in position of the shareholder in a private or close company has been and is a major disincentive to the placing and encouragement of investment. Anyone thinking of investing in a small close company must be deterred by the present position. If he is a minority shareholder, he has to rely upon the good will and financial resources of the other shareholders to buy him out if he wishes to withdraw his investment. We all know the difficulties today of accumulating sufficient personal wealth to enable this to happen.
I am delighted that the 13 clauses which comprise this provision have been introduced, but—in life there always seems to be a "but"—I should like a few changes to be made.
One of the main objections to the introduction of any provision such as this is that, unless great care is taken, it can be used as means for fraudulent intent. Therefore, the rules and regulations must protect the creditors and other shareholders so that they cannot be disadvantaged by

the buying-in of shares. The argument about fraudulent intent has blocked this kind of provision for many years—since the Companies Act 1948.
I support the provision to protect other parties, but I wonder whether one year following the date of the proposed payment to the person whose shares are redeemed or purchased is enough. Should this period be extended? For example, a major shareholder might be able to buy in, dispose of his own shares, get his money out, but keep the company running for more than a year—just long enough to get his money out to the disadvantage of the creditors and other shareholders. Therefore, I wonder whether one year is adequate.
I turn now to the mechanism for the redemption of shares out of capital for private companies. I am glad that that provision has been introduced. I am also pleased that there is the protection of the special authorisation by members of the company.
However, I wish that there could be a rethink on the principle of cancelling shares when they are bought in. I should like to think that we could once more examine the idea of Treasury shares—this matter was raised in the other place—because we shall have to go through a great deal of unnecessary paperwork in cancelling, issuing and then cancelling shares. Companies would be better off if they could hold those shares in limbo, so to speak, until they were required by someone who wished to invest in the company. I see no point in cancelling shares immediately on redemption. The second directive on article 20 suggests a half-way house—that shares not disposed of since the period of redemption must be cancelled, but only after a period of three years.

Mr. Nelson: I agree with my hon. Friend on this matter. But would I be right in suggesting that one of the reasons why the Treasury shares idea was not adopted was that it might encourage companies to make money at the expense of their shareholders by seeing trading opportunities in their own shares, in certain instances, using the special insider knowledge which companies inevitably have to buy shares at a low price from one of those who essentially own the company and subsequently to sell them and make a capital profit? I should like to agree with my hon. Friend, but I suggest that we must address ourselves to that point if we are to persuade those who would wish to see such an amendment carried.

Mr. Page: The opportunities for financial advantage will be present with the introduction of this measure in any form. I agree that what my hon. Friend suggested makes it easier, but I see no reason why directors or people with insider knowledge who want to go down that path should not go down the path of issuing shares, taking them up and redeeming them at a later date. It makes it cumbersome, I agree, but the opportunity is still there.
The House has heard more and more in recent times of the shrunken size of the small business sector and the need to expand it if we are to provide the necessary jobs, the necessary increase in growth and, in turn, increase the quality of our various social services. This part of the Bill will be a major plank in achieving those aims. I hope that it will encourage investment in local firms. I hope that it will make the local company prepared to take in local investors and therefore generate enterprise in a smaller and more localised way.
I have used the word "local" three or four times, and I have done so deliberately. I want to get away from the


large company syndrome that seems to have swept through Britain. I want to see British people prepared to put more and more money into the firms that they know. I want to see a return to the "coffee shop" attitude, where three or four people get together and launch a new scheme. Those who frequented the coffee shops long ago would send out their ships and hope to get a return. I hope that that approach will be continued and that individual investors will be prepared to invest in local firms. If the Bill is enacted in its present form, those investors will know if necessary they will be able to get their money out.
There will be some other extremely beneficial spin-offs. These provisions will provide a way for the estate of a deceased shareholder to find a buyer. They will facilitate the retention of family control in a company. They will enable the buying out to take place of a shareholder who is dissatisfied with the way in which a company is being run. They will be able to be used as a means of introducing industrial democracy. They will encourage employee share ownership and make it much easier for close companies to raise capital. That equity capital will be vital at the start of a company's activity or at a time of expansion.
It is my hope that these provisions will give our people far more choice in their investments than the more conventional forms of the Stock Exchange, the pension fund or the insurance company. The hon. Member for Hackney, Central (Mr. Davis) has said that the Bill will not be opposed in Committee. I hope that we shall see its speedy introduction into the law of the land.

Mr. Ioan Evans: I shall make a brief intervention. I have no intention of taking up the remarks of the hon. Member for Hertfordshire, South-West (Mr. Page). The hon. Gentleman spoke of the possible advantages of companies being able to buy their own shares but he expressed certain reservations. There is the danger that that freedom might increase the scope for fraud. If the Bill did not have its present title, it could well be entitled "The Licence for Fraud Bill".
I am primarily concerned not with the purchase of shares but with the Registry of Business Names and the dangers that are presented by its proposed abolition. At one time in another place the Government decided not to pursue their original intention to abolish the registry. However, they reverted to their original proposal on Report. They have had second thoughts in another place and I hope that before we reach the end of the debate on Second Reading we shall have an indication that they will think again.
There are times when we should address ourselves to improving company legislation. However, there are now more companies closing, going bankrupt or going into liquidation than at any time since the 1930s. This is not the time to remove the controls that are provided by the Registry of Business Names. The possibility of abolishing the registry was discussed by the Labour Government. The proposal was introduced in 1976 and it was dropped by the Labour Government in 1977. There seemed to be certain disadvantages when the proposal emerged from the Department and representations were made by outside bodies, which advanced convincing arguments. It is to the credit of the Labour Government that they were prepared to drop the proposition.

Mr. Clinton Davis: I shall give my hon. Friend some insight into the history of these matters. He may not be aware that the Green Paper was a form of testing opinion. I was not right on all ocasions, but I anticipated correctly that the overwhelming view of those connected with the registry and who needed to use it would be to oppose its abolition. I was proved right and others were proved wrong.

Mr. Evans: I am delighted that my remarks drew that contribution from my hon. Friend. That is an indication that when the proposition was put to the test when the Labour Government were in office all responsible bodies, especially consumer organisations, argued cogently against the registry's abolition. It is a sensible Government who take note when strong representations are made to them. However, the Government have revived the proposal and are pushing ahead with it. As their behaviour in another place has indicated, they are not entirely sure-footed.
The Labour Government were persuaded by the arguments presented to them to continue the registry. They promised that amending legislation would be introduced to enable fees to be charged fully to cover administrative costs. There was a great deal of other legislation introduced by the Labour Government and when their Companies Bill was introduced it was subsequently lost. However, they fulfilled their intention of bringing such a Bill before the House.
The Registry of Business Names was first established in 1916. The 150,000 who were demonstrating against unemployment at Trafalgar Square yesterday said much about the Government's attitudes going back to the 1930s. However, we are now considering legislation that goes back to 1916. The registry was established to ensure that aliens divulged their true indentity behind the name under which they were trading.
The problem is that the fees charged have been too small. This had led to the registry operating at a loss. The original charge in 1916 was only five shillings. Since 1916 it has been increased only once and it now stands at £1. The Government have been only too willing to increase many other charges. The prescription charge has been increased from 20p to £1. Why do not the Government increase the fees charged by the registry, instead of abolishing an organisation which is doing a great deal of good work merely because it is making a loss? I suggest that it is making a loss only because the charges have not been increased in proportion to other costs. It has been estimated that a charge of five shillings in 1916 would warrant a fee of £7.50 today.
When the Labour Government were considering their legislation they took fully into account the recommendations of the Jenkins committee, which recommended a substantial increase in the fees charged to the public for the use of the registry and suggested that a small annual registration fee should be imposed. The Jenkins committee, which was an authoritative body, recommended that the registry should be reorganised to enable it to provide more reliable information. It said that more publicity should be given to the statutory requirements imposed by the 1916 legislation and that these should more vigorously enforced.
That important point was made. One might talk about the body saying that not enough information was being given, that some people still did not register and that they


were divided by the law, but the Jenkins committee said that what should be done was that the registry should be tightened up and reorganised and improved, but not abolished, as the Government propose to do today. There should be a stronger Registry of Business Names, but the Government are abolishing it.
Reference has been made to the television programme at the weekend—"That's Life"—on which there was an example of a person who was involved in furniture sales. People sending the furniture back tried to find out who the owner was. Eventually the BBC had to intervene. There has been little strengthening of consumer protection by the Government, so bodies such as the BBC now have to act as consumer protectors. The BBC eventually found out who the owner was. Having dug deeper, it found out not only that the person had been trading in furniture on that occasion, and that people lost money, but that he had gone bankrupt—yet again. On several occasions he has operated under different company names.
Some carry on trade under about 20 different names. That man was working down the catalogue. After he had gone bankrupt while operating under one trading name, he moved on to the next one and then became bankrupt again, and so on. People are losing their money. They are being led up the garden path by what they think are reliable trading companies. No protection is being afforded by the Government.
The advertisement which many of those people saw was in The Observer. I have great respect for that paper, which is one of the better newspapers. Unfortunately for The Observer, that advertisement was in the classified advertisement columns. There are consumer guarantees for advertisements on other pages, but not under classified advertisements. That person was using a responsible Sunday paper to advertise his wares. He said that magnificent furniture could be obtained at a low cost. Those people were cheated. It is important to introduce this matter into the debate because it comes on the day after that programme. That person was not operating under his own name. He will now operate under his son's name. Therefore, he is carrying on, and more people will be cheated.
If the Government are concerned with protecting the consumer, they should take action. They should not be hidebound by their ideas about increased competition or increased fraud.

Mr. Bowen Wells: Does not the hon. Gentleman agree that in some ways the existence of the Registry of Business Names protects the fraudulent operators? A consumer dealing with a company that has been registered as a registered name assumes it to be a properly run and organised company. In that way, he is duped because the registration of the name under the Companies Act 1960 guarantees no such thing. Therefore, the Registry of Business Names in itself is misleading to the consumer.

Mr. Evans: The hon. Gentleman makes a good point. However, I am not saying that there are adequate safeguards now. The whole episode shows that, despite the Registry of Business Names, fraud is not dealt with. I accept that point. I hope that I shall carry the hon. Gentleman with me in saying that there should be a tightening-up. The Registry of Business Names at least

means that there is a source to which people can go if they want to seek remedies, or to take legal action. If there is no method of control and if any Tom, Dick or Harry can open up a company without any reference to a business registry, the scope for fraud will be increased. Let us go back to the origin of the Act. People could come from abroad and set up business without any check. Therefore, the Act was brought about to introduce some checks. The Government are now abolishing any check.
I shall refer to what has been said by the Consumers Association about the Bill. It is working with the National Consumer Council and other consumer bodies. It says:
It is a basic principle of honest trading that anyone who sets himself up in business should be prepared to say who he is. Until now, the Register of Business Names has existed to provide this information by means of a public register giving details of those who do not trade under their own name. The fees payable to the Register have not been changed since 1916 and the registration arrangements have not been modified for the present day. As a result, the Register makes a considerable loss and does not provide a fully comprehensive service.
I accept that the registry makes a loss and does not provide a comprehensive service. However, if something is not perfect, one seeks to make it perfect. One does not remove it. The Government's policy is sadly mistaken.
The Consumers Association continues:
There is a need to reform the Register and put it on a sound financial basis for the future. If the Register is abolished, an important source of valuable information will be lost for the business community, for customers, for those involved in the enforcement of the law, and for journalists concerned with business affairs. As a result, it will be far more difficult to control those traders who behave unsatisfactorily under one name and then change to a different one.
The measure is a licence to carry out fraud because it means that people who are found out for organising their enterprise under one name can now more easily change the name and carry on with their operation. The Consumers Association continues:
The Government's solution (clauses 28 to 32) would require customers to find out the identity of all traders in advance, in order to guard themselves against transactions which might prove unsatisfactory. This would undermine relationships between traders and their customers. Furthermore, journalists, law enforcement agencies and many others who are concerned to find out the identity and something of the antecedents of those in business would be excluded from access to this information. We would deplore this.
That telling argument has been made by the Consumers Association, supported by the National Consumer Council, a body set up by the Government to deal with consumer protection. It is supported by other consumer organisations such as the Institute of Trading Standards Administration and the Newspaper Publishers Association. One can see why the newspapers are concerned, because the man to whom I referred slipped into the columns ofThe Observer. One can imagine what will happen in the future. Those bodies are deeply concerned by the action which the Government are taking.
The registry provides a useful source of information for potential creditors, for those proposing to register new names and for those who wish to avoid the risk of a passing-off action. It is essential for consumers to have adequate information about the identity and status of those who provide them with goods and services. Consumers should be able to do business on the basis of reasonable trust. It would be in no one's interest if consumers had to make a point of obtaining at the outset the names and addresses of the proprietors of a trading firm.
One wonders why the Government are introducing this clause now. I believe that the real reason is that the Department, like all other Departments, has been told that it must cut back on spending and on the number of its civil servants. The Government are seeking to make a fundamental change at the worst possible time, when companies are falling like leaves in autumn. Many small business men who have become bankrupt in the past two years want to get back into business. There is some restraint on them because of the registry.
There is sufficient reason to vote against the Bill. I hope that the Government will reconsider, if not today, then in Committee. Earlier today I asked the Secretary of State for Trade what further action he proposes to take to protect the consumer. In reply the Minister for Consumer Affairs said:
The record of the Government over the past two years shows we are very ready to take steps to help the consumer both through strengthening competition and in other ways. I have a number of measures in train and will take further action as that proves necessary and practicable.
The Government can take one necessary and practical step now. They can withdraw the clause, which does away with an important defence for the consumer and represents a measure aimed at maintaining good business practice.

Sir Brandon Rhys Williams: I am glad of the opportunity to contribute to the debate. The House knows that I find company law an absorbing interest, and I have sought to introduce a measure of company law reform in every Session since 1969. The way that we organise ourselves for the creation of wealth is fundamental to our social structure and the success of our economy. If our company law is obsolete or contains provisions which belong to out-of-date political or social attitudes, or which run against the best interests of the economy, the House is allowing damage to be done that affects millions, and perhaps even tens of millions, of people. I am particularly pleased that the Department of Trade seems to be imitating me in introducing a measure of company law in every Session. Long may it continue with that enthusiasm.
The Department is indeed to be congratulated on insisting that parliamentary time must be found this year for a measure of this importance. I welcome the Bill wholeheartedly. It contains a number of good, necessary and timely measures. However, I have some doubts about it. I do not believe that the Department is moving quite as fast as the current of events. Even when the House has passed the Bill, with or without the Registry of Business Names, which I cannot believe is the most important element in the Bill, our company law will still be obsolete and will be failing to meet the needs of our rapidly developing technical situation.
Three aspects of company law are very important indeed. One is the supervision of management. The right hon. Member for Lanarkshire, North (Mr. Smith), my hon. Friend the Member for Hornchurch (Mr. Squire) and others have mentioned the privilege of limited liability. That is the crucial point. Some of my right hon. Friends are rather obsessed with the need to allow business men to get on without constantly being dictated to by Ministers or civil servants or being restrained by provisions of law; but we must remember that the privilege of limited liability was granted to companies on condition that they conducted

their affairs in a way that would allow consumers and others who dealt with them to have confidence that they were properly run.
In recent years we have had all too many examples, even involving well-known national firms, where we have discovered all too late that they have not been run as well as they should be. I am speaking not only of fraud, although there have been alarming instances where criminal or near-criminal practices have been allowed or, at any rate, have persisted in spite of the provisions of the law. What concerns me is the existence of a large number, particularly of public and quoted companies, that are not as efficiently run as they should be. I do not believe that the Bill will make a significant difference in that respect.
There has been much talk about self-regulation, and we have looked to the City to provide measures to improve company management, but I am bound to say that the Stock Exchange has been less than equal to the trust placed in it in the way that it has supervised companies with shares listed in London. In New York, under pressure from the SEC, the Stock Exchange includes provisions in its listing agreements that are much more stringent than the Stock Exchange in London is disposed to apply, for instance, in regard to the practice of appointing an audit committee. Moreover, for many years it has been obligatory that companies quoted in New York should have outside directors—and that is the point in regard to supervision that I come back to again and again.
The nature of the British board of directors has changed greatly in the past 30 or 40 years. What one might call the managerial revolution has brought on to the board people who are not directors in the old sense, in that they supervise the work of the executives. They are the executives themselves. They are the heads of departments meeting in a more formal atmosphere than they normally would as they work together in the firm each day. Unless the company includes an element of independent judgment at board level, there is always the risk that the business will grow inefficient because it becomes inbred or does not have enough pressure brought to bear on the executives from people who can see wider horizons than the heads of departments.
Clearly, in firms where there is an independent or able chairman he can act as a sort of one-man supervisory board. I do not recommend that we should move towards the German practice of appointing a completely separate supervisory board for all our companies, although. in fact, many of them have adopted that formula without saying so or, possibly, even being aware of it. The company in which I served for 14 years with tremendous advantage—ICI—has what is in effect a supervisory board.
I should like to see in the Bill more than the rather tentative provisions in regard to directors' reports, disqualification of directors and the interesting new duties of the auditors in clause 15. We need to consider the role of non-executive directors to enable them to function more effectively. We should also consider the way in which directors are elected, so that elections are more open and shareholders are given more choice.
We should also tackle the large problem of all the free Western economies afflicted by an unpredictable rate of inflation—that the flow of savings into investment from the normal sources of finance is inadequate. More and more companies in more and more countries are having to look for funds to the taxpayer or to try to keep going


through Government expenditure. They are not able to obtain the necessary finance because they cannot see far enough into the future to make the commitments that companies made in Victorian times when, with the benefit of the gold standard, there was no risk that prices would change so much that a company would be unable to meet its commitments.
It is a very useful development that companies are to be allowed to buy their own shares. This is extremely significant for small companies.

Mr. Donald Anderson: Has not the problem of a source of finance other than the State been solved in the German context by a two-tier board and by the banks traditionally having not just a role of equity financing, but a role on the supervisory board?

Sir Brandon Rhys Williams: The hon. Gentleman is drawing attention to a matter to which I am about to come. It is true that German company law is different from ours in respect of the way in which boards are organised, because German industry expanded rapidly at a time when there was not a flow of savings as there was here, in the United States and to some extent in France, from investors with money to put into shares. German companies had to look either to the Government or to the banks to finance their industrialisation. The banks were therefore in a much stronger position than ever they were here—until now—and they were able to place on the boards of companies nominees who retained a supervisory function. That is why, even 100 years ago, the Germans began to develop the idea of the supervisory board. Later, they added the idea that worker directors should be appointed to the supervisory boards. People make a mistake if they do not recognise that that was a much later development. However, the hon. Member for Swansea, East (Mr. Anderson) was right in what he said.
The dilemma of the perfectly sound British business which at present is not profit making but which has confidence in its future and wishes to expand or to modernise is real, and we should find ways of amending our company law to assist boards of directors who find themselves in this position. They may have very large and growing commitments to the bank without any long-term view about how they are to pay off the debt. With interest rates as high as they are, and fluctuating as much as they do, it is difficult to run a business on the basis that the capital is subscribed by the bank in the form of short-term loans.
Before the war, a company which found itself in that position and which knew its business to be sound was able often to solve its problems by the issue of debentures. But in inflationary conditions there are no buyers for debentures except on terms of interest so high that no prudent board would think of issuing them. We have to find a way, therefore, of putting companies in a position where they can issue debentures which are dynamised in some way, or which protect the investor against inflation from year to year. The recommendation that I have is that companies should be entitled to sell their value-added forward and not only to commit their assets as they would in a sale of debentures.
This is not an invention of my own. It is much discussed by accountants and others who know clients with this problem. The difficulty is that if a board issued a share that

was related to the performance of the company regardless of its profitability from year to year, it would not have the tax advantage that a debenture has, yet it would have the character of a prior commitment on the turnover of the firm.
I think that there is room for a tax concession which would cost very little but which would allow companies sufficiently adventurous to do so to approach the market in this new way. I think that this has to happen. Although my right hon. and hon. Friends are making considerable progress in the fight against inflation, it is still at an unacceptably high rate and fluctuating so much that no business man looking 10, 15 or 20 years ahead can possibly predict what the position of his company will be. It is impossible to run a capitalist society on the basis of predictions running for only a year or 18 months at a time.
I wish to draw attention to what, in my opinion, is an extremely interesting contrast. It is the difference between the status and rights of investors in companies and the status and rights of landowners. The ownership of shares and the ownership of land are only different forms of investment from which people are able to draw income. For historical reasons, however, investors in companies expect that the profit and loss will accrue to them. If the company does well, they expect the whole of that profit to be distributed to the shareholders. The reverse applies to land. The tenant takes the profit and loss as seasons change and he does well or badly with his harvest; the owner of the land takes a fixed return.
There is a lesson to be learnt from the fact that relationships between the investor and the worker on the land are generally harmonious and that agriculture is one of our most efficient industries, whereas relationships between shareholders and workers are deteriorating and manufacturing industry is causing us increasing alarm, if not despair.
A subject that is not touched upon in the Bill is that of employees' rights and interests in the British limited liability company. After a considerable struggle, we were successful on the last occasion in getting a provision in company law that mentioned the employees, I think for the first time. That great landmark, the 1948 Act, does not mention employees anywhere in its hundreds of sections. Now, the directors must have regard to the interests of their employees, and that is a step forward, even if only a rather symbolic one.
The way that we organise ourselves for work in the private sector is obsolete and goes back to times that are long buried by universal suffrage and all the social changes that have occurred in the last 100 years. The way that we organise ourselves in limited liability companies is like a game of Normans and Saxons, where the investors and managers regard themselves as superior characters and the workers have a secondary status, rather like a conquered people who have to do what they are told and have very limited standing.
I do not think that we can go on with this "two sides" mentality which is so deeply embedded in the nature of our company law. On the Continent—Germany is only one example; the same applies to Denmark, Holland and other countries—company law is much more considerate of employees' rights. Provisions of a much more detailed and much more civilised character are built into the law for dealing with disputes and redundancies. The laws provide that workers are duly consulted about the policy decisions of their firms and their rights are respected as a matter of


statute, not simply as a matter of custom or because an uneasy truce has been struck in the war between the Normans and Saxons in company activities.
We need to recognise in our company law that there has come a change in the character of investment and that there is also a change in the attitude of workers. Investors are becoming less like speculators and more like banks. The big institutions are not like the speculative investors of the old days. They are looking for long-term growth and steady appreciation. They do not want a flickering, exciting share of the kind that is always good news in the club, which was the speculative Stock Exchange investment of 30 or 50 years ago. The institutions are looking for the sort of firm that will expand with the economy, or do even better, and will remain strong in its share of the market and continue 30 or 40 years hence to give them the sort of yield that will enable them to meet their own long-term commitments.
Just as investors are changing in character and we need to cater for a different class of investor in the way that we offer shares through our company structure, so the employees are behaving less and less like casual labourers of the sort that feature in the works of Ricardo and the nineteenth century economists. They are becoming much more like partners in the business. Perhaps this change has crept up on us unconsciously; but workers of any seniority and standing in a firm now have a strong stake in it through their claims to its pension fund and through their claims to redundancy compensation if their firm should be wound up or they lose their jobs. They also have an increasing stake in their company because of the advance of technology. The skills' which they acquire in working for their own firm are less and less likely to be marketable in any other. Until recently, a skilled fitter, plasterer or someone qualified in one of the standard trades could move from firm to firm without too much difficulty. However, as our technology has advanced it has become more difficult for a man to leave his firm, and his stake in the company's success has become a long-term consideration.
I understand that the Government are not averse to accepting significant amendments in Committee. Either in this Bill or the next one, they should consider ways of providing new opportunities, or even tax incentives, in order to develop the practice of employee participation in management decisions.
It is fair to say that our company law reached a high degree of organisation in the 1948 Act. I am not sure whether the amendments made since then have added to its grand concept or to the degree of civilisation of our company law. During the nineteenth century partnership law was developing in parallel with company law, but tragically it seemed to atrophy at about the end of the century. As a result, in the twentieth century there has been no significant development in the concept of partnership in our law.
There have been some notable exceptions, where pioneers and philanthropists have operated partnerships on a large scale; but partnership in Britain usually involves 10 or 20 individuals—on rare occasions somewhat more—in a professional capacity such as the Stock Exchange or the law. The idea of a partnership as an industrial undertaking has not made any significant development. The Liberal Party often draws attention to

this fact, but I regret that its recommendations seem artificial and do not seem to me to be based on such experience as I have gained of industry.
The "two sides" mentality in industry is destroying our society and our economy. In this Parliament, the Government should take radical measures that will allow us to organise ourselves for work in a way that does not constantly give rise to conflict or to the idea that the interests of capital conflict with those of the workers. I should welcome what is known on the Continent as the "historic compromise". I mean that we should work towards a post-Marxist, post-Ricardian solution to the problems of organisation in the creation of wealth.
Investors will have to disclaim the right to the whole of the equity profit. They will have to be content with something equivalent to a debenture or participation in the value-added. And as their half of the historic compromise, the employees will have to give up the right to strike. That is what partnership means. Once a person has become a partner in an enterprise, he will damage himself if he withdraws his labour. Hon. Members may think such concepts futuristic. However, there is no time to talk about such things as if we do not ourselves have to do anything about them. We must act now to make such developments at least a possibility. In point of fact, the change in the status of the workers and in the claims that investors can make on their companies has already begun to take place. In the past two or three years of economic difficulty we have all been forced to think in terms of company survival rather than the boneheaded continuation of the "two sides" conflict, which had become normal industrial practice since the war.
The Government should therefore introduce a range of options in company law to allow businesses to experiment with new forms of human relations and new types of capital structure, which will encourage efficiency, unity of purpose and social responsibility in the way in which our financial and human resources are brought together in the creation of wealth.

Mr. Donald Anderson: The hon. Member for Kensington (Sir B. Rhys Williams) is always good at raising our sights from the micro details of share dealings and forms of accounts to new pastures. At one stage, I thought that he did so in a quasi-Marxist way, in terms of alienation and the crises of systems. I should love to follow him into those pastures, quasi-Marxist as they may be—

Sir Brandon Rhys Williams: Post-Marxist.

Mr. Anderson: I stand corrected. The hon. Gentleman also says that his heart leaps when he sees new companies Bills. I cannot say that my reaction is the same. I emit a deep groan when I see a companies Bill. Although the piecemeal reforms of company law, which are made with increasing regularity, may be good for accountants and for those who advise business men, they are not good for those who have to pay for the advice and who have to find their way through the increasing labyrinth of company law.
Much of part I deals with the implementation of the fourth directive. For a reasonable critique of those clauses one must rely heavily on the experts and practitioners who are in the front line and who can advise us of the difficulties that may be faced. If any Bill is suitable for the


new procedure, under which those who earn their bread and butter on the front line can advise hon. Members during initial sittings, this is it. There may be partisan edges to the Bill, but on the whole it is non-partisan and highly complex. If the Government take the new procedure seriously, they will realise that this Bill is eminently suited to it. I fear that, like all Governments, the Government will refer to the parliamentary timetable, to the end of July, to the Royal Wedding and so on. However, this much-heralded Bill was not introduced until February. Therefore, the problem is one of the Government's making. Had they been clearer about their direction and more mindful of parliamentary scrutiny, they might have allowed time for the adoption of the new procedure.

Mr. Lawrence: Is that not a hollow suggestion? The last time the Government used that procedure—for the Criminal Attempts Bill—they had to alter drastically the heart of one of the Bill's principles as a result of the evidence given. Governments will be reluctant to use that procedure in a Bill such as this.

Mr. Anderson: It is hardly a hollow suggestion. That sounds an eminently good precedent. However, it was a different type of Bill and was of a more partisan nature. Much of part I of this Bill is technical and complex and concerns how accountants and the professions will react to the particular form of company accounts. Given the criticisms that have been made of the Bill, it is unlikely—however good a precedent was set by the Criminal Attempts Bill—that the heart will be torn out of the implementation of the fourth directive.
As to the complexities, one has heard from the accountancy profession of its concern about the increasing conflict between statute law and the recommended practice of the professions in these fields. One thinks also of the fears of accountants about the scope of their duty under clause 15, which would require the auditors to consider whether the information given in the directors' report is consistent with the accounts and to state in their report any inconsistency. This may impose an impossible task—certainly a very difficult task—on auditors, as outsiders, more or less, by definition, in passing a view on what may be a fairly general comment within the directors' report on a particular financial year. More guidance and assistance is needed on the way in which the Government see clause 15 working in practice.
Some of my hon. Friends have said that we have yet another Companies Bill without any reference to either the interests of consumers—substantial parts of the Bill appear adverse to their interests—or to employees. This relates particularly to the point made by the hon. Member for Kensington, and his "historic compromise" and the symbolic inclusion at last in company law that, in passing, genuflection should be made in the direction of employees, however unenforceable that may be in the courts.
The Government have been quite unbending against the almost universally critical response to their proposal to abolish the Registry of Business Names. I shall not go in detail through the briefing which the National Consumer Council has given on this matter. The Government are

aware of the council's points of detail. In many respects, they appear to be of substance. The council says, in short, that the abolition of the registry could
produce a paradise for shady traders, who would find it much easier to conceal their true identity, from consumers, trading standards officers and investigative journalists and broadcasters trying to track them down.
The council concludes that the Government should retain the Registry of Business Names in a new, revitalised and self-financing form. If the Government are so concerned about the hard cash of this matter, it is not difficult to increase the registration fee.
In points of detail, the council states that consumers need to be able to trace the correct name and address of the trader whom they wish to sue, which is essential if they are to pursue a court judgment to enforcement.
The council refers to the problems of investigative journalists. The Minister will know of the complaints that have been made not only by the Esther Rantzen show, "That's Life", but also by that extremely valuable BBC "Checkpoint" series—in which I have been involved in relation to some matters. I find that an ideal weapon against the fraudulent trader. Such programmes have shown considerable concern about the extent to which the work that they do, albeit as troublemakers but on behalf of the consumer, will be hampered by the Government's decision to abolish the registry.
As to particular flaws in the Bill relating to consumers seeking to enforce their rights, the Minister will know that the NCC has mentioned that the new system will be of no use to consumers where a business has ceased trading, and therefore the information that is available within the premises or on the business stationery will be of no assistance. It will be impossible to trace the owners, even though those owners of a business may have peronal assets upon which creditors might be entitled to claim in seeking to enforce their judgments.
Similar problems could arise where a business does not have premises which are open to customers or may move its address frequently. The NCC has asked:
How will the new requirements be enforceable against mobile-van traders, itinerant 'hotel sale' traders or market stall holders? It won't be easy for a mail-order customer in Nottingham to find out who owns a defaulting business in Exeter.
Another point of detail is that the provision that the true names of business owners and the business address should be displayed inside trade premises is manifestly inadequate, in that for some reason there may be problems of access to the interior of the company premises. The NCC suggests that there should be an obligation on companies to display the home address of the business's owner or owners. A consumer who has, for example, through inadvertence, disposed of the business stationery after a purchase may thereafter have no right to ask for details of the owners of the business later in order to sue. Thereafter, if the consumer goes to a trading standards officer of a local authority or to an investigative journalist, those two gentlemen would find it difficult, if not impossible, to find that information as they would have no locus standi in relation to the business.
The NCC also suggests that it is wrong that no time limit is given for disclosing information, and it suggests a 21-day limit. I hope that the Minister will consider that matter carefully in Committee.
This matter is of importance not only to consumers generally. The Minister may have noticed some trade


union pressure in this respect. One trade union official, the London district secretary of the Furniture, Timber and Allied Trades Unions, has said that for those in the trade union movement that registry has been
an invaluable source of information, particularly for tracing the employer who has abandoned the ship with unpaid wages, accrued holiday pay and other entitlements.
As the Minister knows, there has been an almost universal rejection of the proposal to abolish the registry, not just from those areas from which he might expect such criticism—consumer interests—but also from the CBI. It appears clear that in this matter the consumer side of the Department, if it had any voice, has been completely overruled by the companies side, which has taken a narrow view of the Department's responsibilities.
It is not just the consumer side that has been overridden in this way. As many hon. Members have said today, it appears that the decision to seek to abolish the registry owes more to the euphoric immediate post-election view of a bonfire of controls and of cutting back the public sector—of "public bad; private good." This is a hangover from that period, which is juggernauting on, although all those who use the registry and are directly involved have sought to show the Government the pitfalls which will result from its abolition.
In passing, let me say that in our discussions of company law reform, there is always an interesting reversal of roles between the parties—we have made this point during the Committee stages of other Bills—in respect of the traditional attitudes to policing. In other sectors the Government are prone to increase police recruitment, but they are quick to deprive company police of the manpower to carry out investigations and they seek to rely on self-regulation unless there is a tidal wave of opposition from the Stock Exchange and so on. The Opposition, who normally take a more libertarian view, adopt authoritarian views in this respect and welcome moves to give Department of Trade inspectors greater powers to call witnesses and moves to toughen the law on fraud.
One thinks of the timid response of the Secretary of State in the St. Piran case where, in clear defiance of the recommendation of the Takeover Panel, the Government refused to act. The good Mr. Raper must be laughing all the way to the bank, having bought the shares at an undervalued price and at 35p less than the Takeover Panel recommended in June 1980. The Government are particularly coy and reluctant about intervening in an obvious case such as St. Piran, where not only their inspectors, but a unanimous report of the Takeover Panel clearly condemned what was happening.
I welcome the attempt to lift the administrative burden on small companies. Presumably the proposal to allow the repurchase of shares includes, as part of its motive, an attempt to keep family businesses from going public. However, I am a little concerned that "small" is defined as a turnover of up to £1·4 million. Investigative journalists and consumers would need information on such businesses, but they will be exempted in relation to, for example, the form of accounts that they have to supply to the registrar. Presumably they will still have to give full accounts to their shareholders, and it seems odd that they will have to go through those two exercises and that creditors will not have the material that is available to

shareholders. That proposal falls into the same category as the abolition of the registry and represents another hurdle for the interests of consumers.
I welcome the Government's re-think on the statutory registration of share interests by parties acting in concert. I recall the Opposition's attempt on the previous Companies Bill to introduce a new clause following the Consolidated Gold Fields case. We were told that our proposals were too draconian and that self-regulation would be adequate. Indeed, the Secretary of State was resting on self-regulation through the autumn of last year and even during debates in another place. Happily, that self-confidence has gone—weighed down by the combined pressure of the City and business interests that demanded tougher measures.
The Minister for Trade knows only too well the conclusion of the report by Department of Trade inspectors on the Consolidated Gold Fields affair. The consultative document issued on Friday last week may go a long way to cover the points that we raised during the passage of the previous Bill. There may not be many prosecutions. I suspect that no prosecutions are pending as a result of the insider dealer provisions included in the previous legislation, but they may have a deterrent effect on those who would otherwise be inclined to err.
The Government have clearly recognised that there was a lacuna in the law, through share buying by nominees, particularly foreign nominees. That was revealed not only by the Consolidated Gold Fields case, but by Dunlop and, earlier this year, by the Renwick group case. It is important that companies have the right to apply to the courts to have shares frozen when ownership cannot be determined and that they should have the Night to investigate their own share registers.
We shall have to look carefully at the consultative document issued early last month and to amend the Bill where unacceptable similarities of names occur. The Government's stance on the publication of the Bill and throughout debates in another place has clearly proved to be untenable. They have moved substantially, though I join my right hon. Friend the Member for Lanarkshire, North (Mr. Smith) in asking them to look carefully at the six-week period for investigation. Much damage can be done during that time.
A constant refrain of those involved in company law debates is the need for consolidation, because of the growth of company law statutes at an increasing pace. We had Acts in 1948, 1967, 1976 and 1980. In its way the growth is rather like the steady increase in population growth. On its introduction to another place, the Bill had 109 pages and 62 clauses. When it reached this House it had grown to 131 pages and 79 clauses and it is certain to grow even more as a result of the two consultative documents, let alone any amendments accepted in Committee. It will be a weighty measure by the time it leaves us.
I sometimes have a nightmare that company law reform is similar to a giant snowball. As it rolls downhill it picks up new items. Insider dealing provisions were added to the previous Bills and loans to directors, concert parties and an amendment dealing with names that are too alike—which we thought had been left behind—may be added to this Bill. The snowball gains momentum until one gets the impression that the whole thing is out of control.
The seventh directive from the EEC will also have to be implemented, as will a conveyor belt of other directives. Perhaps the pipedream of one consolidated statute cannot yet be achieved. An ever increasing number of statutes with little or no consolidation is not the way to run a legislative railroad. There must be a better way. It can perhaps at last be tackled by the welcome process of clause 76.

Mr. Nicholas Baker: I shall not follow the remarks of the hon. Member for Swansea, East (Mr. Anderson) too far except to say that I can never make up my mind, listening to the comments of Opposition Members, whether they welcome measures to deal with matters of urgent importance. I agree with the hon. Gentleman that the Bill, especially the technical and accounting provisions at the beginning, would be suitable for the new procedure. I recall the roars of derision that greeted the Minister for Trade when he suggested during discussion of the last Companies Bill that there were matters that he would include in another Companies Bill yet to be produced. I congratulate my hon. Friend on introducing the second Bill. Two Bills in two years must be a record.
I am concerned about one aspect of the consolidation provision. I should like my hon. Friend to explain whether this novel procedure means that the Bill will come before the Select Committee on Consolidation. I cannot see any reason why it should not do so. Nor can I see any reason why, if it did, the consolidation measure should be held up. Like anyone involved in the practice of company law, I welcome consolidation.
The Bill implements the fourth EEC directive. As the hon. Member for Swansea, East remarked, it seems that we shall be receiving company law from the EEC rather than from the Jenkins committee. I urge the Government to take much greater interest in the progress and process of these directives at Brussels. An example of a directive that was growing in a manner inimical to company law and to companies and businesses in this country was the fifth directive on participation which threatened, at one time, to contribute nothing useful to participation or to company law in this country. I hope, therefore, that much closer attention will be paid to the progress of these directives in Brussels. They will play a much more important role in company law in the future.
I hope that the Government will ensure that these directives take account of the practices and the highly developed system of company law in this country by providing a series of options rather than one overall method that has to be imposed throughout the Community. I pay tribute to my hon. Friend the Member for Kensington (Sir B. Rhys Williams) who feels that company law should play a much greater part in social policy than I do. My hon. Friend might agree that it is undesirable to have social policy in company law imposed from Europe. It is much less likely to be suitable than the social policies that we devise for ourselves.
I record some disappointment that the smallest rank of companies will be required to maintain an audit. I am not suggesting that they would not want or need to produce accounts. I do not, however, attach the same weight to the

importance of audited accounts, whether for Inland Revenue purposes or for creditors, investors and shareholders, that some hon. Members attach to them.
More needs to be done in the form of incorporation for small firms, although the avenues for progress are greater in the field of the development of partnership law than in company law. I was interested to hear the contribution by the right hon. Member for Orkney and Shetland (Mr. Grimond). I felt that the avenues for the job ownership company to which he referred lay in partnership and taxation rather than in company law.
I would like to make some remarks about the Registry of Business Names. One gets the feeling, listening to the debate, that there is some great, all-providing, effective British institution once again in peril to which noble Lords of every shape and size are rallying in defence. The registry was started because people were frightened that Germans would come over to this country and start businesses in the First World War. I suppose that if Germans now came to this country, we would be much more likely to consider them for the Queen's Award.
The registry provides for limited information. It gives no protection. It does not give any right in the name. It does not give any protection against third parties. It is simply an information exchange. The tears I began to feel welling in my eyes when I heard about the plight of investigative journalists almost impaired my capacity to remain in my place. The information really is extremely limited. I do not know how many hon. Members are aware of how limited it is. The idea that investigative journalists rely on the registry to do their job seems to me ludicrous.
The registry is, in practice, substantially ignored. It is not a check on fraud. It has only a limited use in the consumer field. Those who are consumers buy from people. They buy from shops. They buy in writing through mail order. They have remedies against the people from whom they buy and with whom they deal.
I am not suggesting that the Registry of Business Names is entirely useless. The answer to the question "Are you saying that the Registry of Business Names has no use and performs no function?" by the union to which I belong and to which reference was made by the right hon. Member for Lanarkshire, North (Mr. Smith) is that it does perform a limited function. I do not believe, however, that the Law Society or many other professional bodies have considered adequately the strength and the efficacy of the protection set out in the Bill.
There may be a case for beefing up the registry. I do not believe, however, that any beefed-up registry is a satisfactory method of dealing with fraud. The idea that those who engage in fraud—the people manifestly who do not register with the Registry of Business Names—would be any more likely to register if required to pay higher fees seems another example of putting hope before experience. We want to provide protection for consumers. I believe that this task is already tackled. The people who need the information are businesses, large and small, and those who deal with them. I believe that the provisions of the Bill are a substantial contribution towards that aim. I wish to make two points—

Mr. Lawrence: I have listened with care to my hon. Friend. He does not appear to have listened with care to the remarks of a former chairman of the Consumer Council, Baroness Elliot of Harwood, who said in the other place:


At least half the inquiries which come before it"—
that is the Consumer Council—
have involved tracking down the company through the Registry of Business Names".—[Official Report, House of Lords, 19 March 1981; Vol. 418, c. 867.]
That seems to be substantial evidence that the Registry of Business Names is a very effective medium for protecting the interests of consumers. Will my hon. Friend direct his argument to those words?

Mr. Baker: I did not see the remarks to which my hon. and learned Friend referred. They suggest that tracking down the companies would have been done more effectively through the companies registry. I doubt that protection is afforded by such tracking down.
There is a case for widening the class of business communications which will require the information covered in the Bill. The provisions must be properly enforced. We must make it clear that penalties will be imposed on people who do not carry out the provisions. We spend far too much time legislating for small penalties and failing to enforce them. There is a strong case for providing much higher penalties. I wonder whether the penalties in the Bill are high enough.
I welcome the Bill. People involved in the business sector and people in the professional sector advising businesses will also welcome the Bill.

Sir Graham Page: I apologise for being absent for part of the debate because of parliamentary duties on a Select Committee. I was here in time to hear the hon. Member for Swansea, East (Mr. Anderson) say that the Bill would be useful to accountants and solicitors who would be able to collect money for advice. Neither accountants nor solicitors, of which I am one, welcome complicated legislation because it provides far more chance of them giving bad advice, with the result that insurance premiums for negligence go up enormously. We would welcome simple company law reforms.
The Minister assured the House that he did not intend to introduce a Companies Bill every year. I am glad that there has not yet been a shuffle in the Ministry and that my hon. Friend the Member for Kensington (Sir B. Rhys Williams) has not taken over, because he introduces a new Companies Bill each year. For the past 20 years, or at least since Jenkins reported in 1962, Parliament has been in a perpetual state of waiting for a Companies Bill. Even when Parliament has before it a Companies Bill such as this, another Bill is anticipated.
Those of us who are enthusiasts and want to reform the whole of company law try to use the Companies Bill which is floating through Parliament at the time to introduce valuable amendments. However, all that we are told by the responsible Minister is "Pas ce soir Josephine". I shall translate. It means "Not in this Bill, but in the next one." So we go on.
I was a little horrified when I read part I, because each of the half-dozen Bills introduced in the last 20 years has added more and more requirements to company law and to the inverted pyramid which has to be balanced on the head of small companies in particular. The small companies have suffered from many complications in company law. In each of the Bills of expediency that have been introduced, and in the regulations and orders which they have spawned, the requirements of company law have piled up on the small company.
The small family company was the acorn from which many of our great industrial and commercial oaks grew. I wonder whether that acorn would have been planted if there had been all the present requirements of form filling and filing and the procedural and administrative responsibilities which now fall on those who try to run small companies.
I was horrified by part I and the prospect of the harmonisation of company law in the European Community. The advocates of harmonisation really mean "unison". I do not believe that such harmonisation is the road to unity in commercial endeavour within the Community. I am, of course, pro-European, but I do not go along with those who are like the ardent church-going hymn singers who believe that the only way to heaven is in a four-part harmony. I believe that in some cases harmonisation can be successful, but I am not enthusiastic about putting into a statutory straitjacket—as part I does—the self-regulatory flexibility of the company accounting arrangements developed by the consultative committee of accounting bodies, to which the Minister paid tribute, the Accounting Standards Committee, and the Auditing Practices Committee. The Bill puts them into legislation.
I was somewhat relieved when I came to the clauses dealing with accounting exemptions. There at least we are going a little along the road to the categorisation of companies and a code of exemption from form filling and filing for small and medium-sized companies. Perhaps it is more of a narrow lane than a road. Companies are not relieved of preparing the information, only of filing it with the registrar. Furthermore, they are left with some burdensome responsibilities imposed by previous Companies Acts. That is right for the listed company which is seeking investment and the confidence of the public, but I had hoped that in the Bill we could have found more opportunity for relieving small companies from some of the burdens.
I welcome the clauses that deal with directors' reports. To the ordinary layman the directors' report is far more important than the accounts. He can understand it better. He will believe something in the directors' report more than figures in which he believes there might be a catch. Clauses 13, 14 and 15 contain improvements to the informative value of directors' reports. Clause 16 disposes of some unnecessary information. I hope that the clauses will be accepted by the professions.
If there is to be harmonisation, the Government must be congratulated on getting in early, certainly earlier than many other European countries. The Government should be congratulated, too, on getting it in this flexible form and setting a precedent rather than having to follow precedents which may be set by other countries. So we must be thankful for small mercies.
However, I cannot be thankful for part II. I am opposed to the abolition of the power of the Registrar of Companies to refuse to register a company in a name similar to that of an existing company. I am opposed to the abolition of the Registry of Business Names. On the first matter—the registration of a company's name—can anyone seriously condone the registration of a name which, although it is not the same as one that is already registered, is so similar as to be misleading? The Bill is an invitation to mischievous people to register such a name.
I entirely agree with the Minister and his Department about reduction in public expenditure. If the Bill reduced


the checking of names, and thus released staff and saved resources, there would be some logic and reason in the provision that the Registrar of Companies could allow similar names to be registered. But, according to the Bill, a substantial check will still be needed, and surely that will take just as long as the present check.
It will be necessary to check the position of the name "limited". That is fairly easy. It will be necessary to see whether the name is the same and to consider punctuations, size of type, and so on. It will be necessary to check whether, in the opinion of the Secretary of State, the name constitutes "a criminal offence". It will be necessary to check whether, in the opinion of the Secretary of State, the name is "offensive". That cannot be done by the office boy. A certain amount of discretion is needed to make those decisions.
It has to be decided by a check whether the name is
likely to give the impression that the company is connected in any way"—
I underline the words "in any way"—with the Government or local authorities, or to check whether it includes
any word or expression for the time being specified in regulations made under section 31 of this Act".
We do not know what those regulations will include or which words or expressions they will exclude from the titles of companies. In my opinion, a substantial check will need to be made.
I do not know whether I heard the figures right, but I thought I heard my hon. Friend say that the staff now employed on this work was one-third of the number employed in the Registry of Business Names. The figure that I have for the people employed by that registry is 65. Does it mean that only 22 staff are involved in checking companies' names? If so, will the service of those 22 staff really be disposed of, when one considers the type of checks that I read out?
The index of names will still have to be kept. There will have to be special administration under the Bill concerning change of name, companies limited by guarantee, and overseas companies. Where, then, is the saving in manpower or money in allowing the registration of a similar but not the same name?
I have much the same comments to make regarding the Registry of Business Names. I should be persuaded if I thought that there was a saving of manpower and resources by disposing of the registry. However, it was admitted in another place by the Government spokesman that the cost of the 65 staff who run the Registry of Business Names made redundant by its closure would be covered by increasing the registration fee from £1 to £5. That is a perfectly reasonable and acceptable fee.
However, I question whether those 65 people could be made redundant and the provisions of the Bill still be carried out. There would have to be a staff to deal with consents under clause 28(2)(b), or with exemptions from the need for consents. There would have to be staff to deal with complaints from the public and from other traders that a particular trader was not playing the game under clauses 28 and 29. A staff would be needed to prepare cases for prosecution. Surely, inspectors would be needed to carry out spot checks where no complaint may have been made, but about names on letters, invoices, receipts, and so on, and notices on business premises.
I am sure that the administration and policing of clauses 28 and 29 and the regulations which may be made under them will require the 65 staff at present employed. So I conclude that part II seeks to destroy two useful Government services which, I agree, are not perfect but which have proved very useful, and which, if destroyed, will not reduce staff or costs.
Having criticised parts I and II, I am happy to say that I welcome part III. In particular, I welcome the provisions for the purchase by a company of its own shares. From the point of view of encouraging investment, this provision is long overdue. We debated the matter during the last Companies Bill. Careful consideration may need to be given to the size of the company and the restrictions on purchase, but I am sure that the provision will be valuable, particularly to companies whose shares do not have a ready market. Clauses 42 to 46 relate to that matter.
First, in part III, there are provisions to remove the anxieties of the companies which have effected mergers, takeovers, or reconstructions, have distributed the premiums on the share issues, and are now told by the judgment in Shearer v. Bercain that they should not have done so. I believe that the Government are right to try to correct that decision. However, in doing so, they are being over-restrictive in clauses 35 to 41. I shall briefly put on record why I believe that they are being over-restrictive. 
In clause 36, the proportion of equity capital acquired to qualify for relief should be 75 per cent. not 90 per cent.—it does not need to be so high—and the distribution being restricted to the profits from one of the merged companies defeats the whole object of the exercise. In clause 37, the formation of a new company or the use of a dormant company is unnecessary. In clause 38, the restrictions to share exchanges to wholly-owned subsidiaries should go. Finally, in clause 39, share-for-share arrangements should be widened to include share-for-share and cash arrangements. I merely put those on record as improvements that could be made to that part of the Bill which otherwise is welcome.

Mr. Parkinson: I am following my right hon. Friend's speech with great interest, and we shall take careful note of the points that he has made. He talked earlier about whether we had not imposed too heavy a duty on the smaller category of company in part I. One of the problems is that, as a result of the purchase-of-own-shares provisions, we envisage that there will be an increase in the number of outside shareholders holding shares in smaller and medium-sized companies. Therefore, the Government were in a dilemma. If we are to encourage outside minority shareholders in small and medium-sized companies, we must ensure that they have access to reasonable information. That was one of the dilemmas with which the Government were presented. At present, many smaller companies do not have outside shareholders, but we hope that there will be more such shareholders.

Sir G. Page: I appreciate that point. A lot now depends on what we mean by small companies. For example, the small company described in the Bill is much larger than what I have always understood to be a small company. That is why I said that we had not gone far enough in the reform of company law in categorising the class of companies. I still believe that we must think in terms of a very small company, a small company, a rather larger small company, and so on. The rules apply differently according to the size and nature of the company.
I have been critical about parts I, II and III. I shall refrain from embarking upon the miscellaneous and supplemental matters in part IV. However, it is strange that time has been found to include a number of insignificant matters to the exclusion of matters which some of us think to be far more important in the reform of company law. For example, what is the point of clause 65 solemnly stating that the registrar shall have power to give a company a number with a letter in it? Does that really mean that the registrar will alter the numbers of existing companies? If he does that, he will be in great trouble over printing. We shall never get it all done. Why add the letter?
That is perhaps a small point, but it is one of those small matters that have been included in the miscellaneous provisions. If there is room for matters such as that, I can suggest some far more important ones.
If the Bill is not intended to cover what I would call real company law reform—obviously, it intends to deal only with specific matters—it might have been better to have confined it to parts I and III, dealing with the accounts and the purchase by a company of its own shares, which are two important matters, rather than to have thrown in provisions dealing with company and business names, the registration of share class rights, bona vacantia and all the rest which succeed only in extending the time of debate.

Mr. Kenneth Carlisle: I am pleased to follow my right hon. Friend the Member for Crosby (Sir G. Page), who is clearly an expert in this subject and whose wisdom and knowledge have contributed much to the debate. It was interesting to see how my right hon. Friend's views differed from those of my hon. Friend the Member for Dorset, North (Mr. Baker), who is also an expert in this matter. They have completely different views about the business registry. Therefore, as in many areas, experts disagree. 
It is fair to say that the Bill does not arouse the enthusiasm of the public at large. Certainly it is not likely to bring bus loads of people to lobby their Members of Parliament, let alone Members of the Opposition. Nevertheless, it is an important Bill that deals with matters that affect the well-being and resilience of many United Kingdom businesses.
Few people in Britiain can now doubt that one of our greatest desires is to see the revival of business activity. Therefore, any measure that can help towards that goal must be welcomed. The Bill does just that. Moreover, many of its provisions will have a cumulative and increasingly beneficial effect, which must surely be the goal of any good legislation.
I want to concentrate on the aid that the Bill gives to small businesses, because in my view that is the most important aspect, for two reasons. First, we must look to small businesses to provide most of the growth in employment that we seek. We know that during the recession large firms have had to reduce the number of their employees. It is clear that even as we come out of the recession those larger businesses will not re-employ people. They now have spare capacity. Their ablility to be more productive has increased and as they make more profits they will instal new machines, which in turn will employ fewer people. Therefore, we must look to service industries, and especially to small businesses, for new employment. In the words of my right hon. Friend the

Member for Crosby, we must nurture the acorns that will produce the oaks. That alone will provide the employment prospects that we want. That applies not only to my constituency, but to every constituency in the country.
The second reason for my concentrating on small businesses is that the Bill represents a further step in the Government's efforts to help small businesses. During the two years of this Government we have seen many measures to help small businesses which in total amount to a substantial package. We have removed many of the restrictions that used to face small businessess. We have reformed many of the planning controls and removed obstacles in employment law. We have reduced the burden of bureaucracy and raised financial incentives. We have greatly improved counselling services. The list is long and detailed and amounts to an impressive package.
The Bill adds further to that package and assists small businesses especially in two ways. First, it enables the limited company to buy its own shares. As we know. the Wilson committee on financial institutions advised that this was a necessary reform. Indeed, many European countries, as well as the United States of America, already allow this. Therefore, this part of the Bill does not represent a wild leap into the dark. It advocates what is already accepted practice by many of our competitors, and an independent inquiry has advised its adoption. Certainly it has been long advocated in this House, and there is fundamental agreement on that aim on both sides of the Chamber.
The advantages of allowing limited companies to purchase their shares are clear. First, small firms will be able to raise outside capital without the fear of losing family control of the business. Secondly, a shareholder with equity in a small unlisted company will more easily be able to sell his stake if he wants to.
Both those matters are important. The small business man will be able to raise funds to expand his business without any of the inhibitions that now restrain him. For example, one of the things that stops a private company from expanding is the fear that the family will lose control of that business. The Bill helps to solve that problem. In addition, the outside investor is much more likely to make his funds available if he knows that he is unlikely to be locked into that small business for ever.
We must not ignore another aspect that has been mentioned several times, namely, the impact of this measure on employee share ownership. The Bill will encourage small businesses to introduce profit-sharing schemes. They will not have to fear the consequences of diluting their equity. Profit sharing is something for which we as a party must press.
As a result of the Bill small businesses will be able to expand more readily. They will be more likely to keep control of their independence. There will be less need to sell out to a larger business to raise the capital to expand. I am sure that the House welcomes that. We all lived through the period a decade ago when everyone wanted smaller companies to form larger units. We must have learnt from experience that that seldom leads to greater energy, activity or innovation. We must have learnt from recent history.
I understand that to make this part of the Bill effective my right hon. and learned Friend the Chancellor of the Exchequer will have to amend the provisions for the taxation of share repurchases. That factor has not been mentioned. The current tax regime clearly discriminates


against what the Bill sets out to achieve. I understand that my right hon. and learned Friend is considering the matter, and following the proposed Green Paper I hope that the rules will be changed in the next Budget. I should be grateful if my hon. Friend the Minister would say something about that when he replies to the debate.
Fears have been expressed that creditors will be put at risk by the proposed reform. I am glad that, in the context of the Bill, those fears are groundless. There are considerable safeguards against possible abuse. The Bill will help small companies by making it easier for them to attract the capital with which to expand. It will help small businesses by making their accounting disclosures less onerous. My right hon. Friend the Member for Crosby referred to that in his pungent phrase about less form filling and less filing.
One of the greatest complaints from small businesses, which we all understand, is the amount of paper work imposed by bureaucracy. We must remember that business men are active, go-ahead people who do not wish to be over-burdened by detailed requirements. They do not want their activities cramped by office work.
The Government have already abolished more than 1 million forms. The provisions in the Bill relating to accountancy are part of a campaign to lessen the burden on small business men. At least the Government have the correct attitude. Instead of asking themselves what it would be nice for the Government to know, establishing a great procedure through which all that information flows, and making everyone dance to their whim, they have asked what is the irreducible minimum that the Government have to know. That is a different approach which, if adopted by every branch of Government, will mean that Government bureaucracy will be vastly reduced. That approach alone will reduce the burden of bureaucracy. I congratulate the Government on that attitude and initiative.
I have restricted myself to the parts of the Bill that I consider to be of most help to small businesses. As we have heard, other speakers are better qualified technically to deal with the more detailed aspects of the Bill. I have concentrated on the small business area because it has an essential role in raising the level of employment.
The Bill adds to the many actions that the Government have taken to help small businesses. The Conservative Party is the one party that truly has the future of small businesses at heart. That is curious, because of the great emphasis that the Opposition place on the importance of employment. Small businesses will create employment. The Government's policy is for the long-term good of Britain. The Bill, although undramatic, contributes solidly to that goal.

Mr. Ian Lang: It is a pleasure to follow my hon. Friend the Member for Lincoln (Mr. Carlisle), whose distinguished work in the area of wider share ownership is well known. He recently published a paper on that subject which was well received. I share his aim and belief that the Bill will assist with the fulfilment of that aim.
In some ways it is a remarkable Bill. Although I do not mean that as an entirely unqualified compliment, the Bill has much to commend it. Its general thrust and purpose is respectable. The implementation of European directives is

desirable and acceptable, provided that they are not oppressive. The principle of international harmonisation must be welcomed in company law, especially when our trade abroad is so crucial and when, in European terms, it is growing so satisfactorily. That is especially true if the harmonisation is enlightened, as it appears to be in the Bill.
The greater flexibility in our accounting requirements for the presentation of accounts and a reduction in the demands on small firms is to be welcomed, provided—as is the case—that the central accounting concept of a true and fair view is protected and its overriding character retained. That is the case in the Bill, which reflects the British input to the negotiations on the directives.
The new gradation of companies, with the establishment of medium and small-sized companies and with exemptions for full accounting requirements is attractive. It should help the managers of such companies to concentrate on what matters—the essential features of making their companies successful in whichever area they operate. I am inclined to believe of accountants, as the late Iain Macleod said of economists, that they should be on tap and not on top.
I believe that the right balance has been struck in the combination of the full disclosure of information to the shareholders with the important exemptions and reductions in what must be filed with the Registrar of Companies. It is right that the Government have decided to continue the audit requirements for small companies, which has been welcomed by so many other speakers today. The candid and impartial regular assessments of the affairs of a company, large or small, are an important safeguard to trading standards, shareholders, creditors and the public interest.
I am slightly concerned that although when setting the size thresholds of different sorts of companies in clause 8 the Government have set them commendably close to the upper limit of the directive, they nervertheless create new distinctions. I wonder how they fit in with the existing definitions—for example with corporation tax, where the limit for a small company has been fixed at £80,000 of gross profits, or with employment legislation where other and lower thresholds for numbers employed apply for exemptions.
There is a danger of getting into a muddle with too many yardsticks of measurement. The Bill contains yardsticks of turnover, assets and numbers of employees. I understand that only two of the three need be attempted. There are too many different criteria, and I wonder whether consideration should not be given to internal harmonisation within the United Kingdom.
There is also a danger of muddle because of the sheer mass of company legislation now coming forward. It is threatening to deny the very simplification and improvement that it seeks. It has been said several times today that company law is accelerating with the number of Bills brought forward. What used to happen every two decades is now happening almost every year. Since the 1967 Act there has been the 1976 Act, the 1980 Act and now the 1981 Bill, which I understand contains 17 amendments to last year's measure. The Acts amount to more than 700 pages.
I accept that special circumstances are involved in our European membership, but I make a plea for a consolidation measure to do for the 1950s, 1960s and 1970s what the 1948 Act did for the first half of the


century, and then, perhaps, for a period of silence for digestion and reflection. I understand and hope that clause 76 will make the process of consolidation easier.
What is more unsatisfactory, and the reason I described the Bill as in some ways remarkable at the outset of my remarks, is the way in which it is undergoing major running repairs on the hoof, so to speak. I do not question the quality or the importance of the changes being made during its passage. Indeed, I particularly welcome the provisions for share purchase by a company and the proposed "dawn raid/concert party" provisions. Both are the progeny of well-prepared and well-received Green Papers, as are the provisions in the EEC fourth directive.
However, I mildly question the propriety of bringing forward such major provisions—many would say that they were more important than the rest of the Bill—after Second Reading in the other place and—in the case of "dawn raids"—after Second Reading in this House. I believe that on Second Reading in the other place Lord Lyell referred to the disclosure provisions as complex and wide-ranging subjects. That may be so, and I welcome the Government's change of mind, but I wonder, with some trepidation, how many more directives, complex and wide-ranging subjects and companies Bills are already on the drawing board or even in the pipeline.
The Bill becomes like a vessel whose hull is halfway down the launching slip before the designers have decided whether it is to be an aircraft carrier or a submarine. For all that, basically it is a good Bill and I believe that it will float. Indeed, it may even fly. I should be the first to agree that it is the better for the increased ballast that it now carries.
I accord a very warm welcome to the provisions to enable a company to buy its own shares and to issue redeemable shares as opposed to redeemable preference shares. This comes under the heading "miscellaneous", but I regard this as an important part of the Bill.
I think that it will be particularly beneficial, as my hon. Friend the Member for Lincoln said, to small companies. It is in keeping with the many, varied and highly beneficial measures introduced by the Government for small businesses during the past two years. Indeed, I cannot think why this measure has not been introduced before, during the 100-odd years since it was banned in 1887. It harmonises, in particular, with the venture capital scheme, the business start-up scheme and the wider employee-participation share ownership scheme.
Clearly, a system of checks and safeguards is appropriate. The restriction on the funding of repurchases to distributable profits or proceeds of a fresh issue makes sense, as does the partial exemption of private companies from this requirement under clause 49. So, too, do the requirements for the establishment of a capital redemption reserve, the disclosure of particulars and contracts of purchases, the requirements relating to redemptions or purchases out of capital in clause 50 and the publicity thereof in clause 51.
But within those safeguards, the new provisions should greatly improve the marketability of shares in small companies. That seems fundamentally important. Family companies will be able to accept outside participation with greater equanimity. Institutions will feel less threatened at the prospect of being locked into unmarketable companies. Public companies will be better able to return surplus funds to shareholders, and employee share schemes will be simpler and easier to manage.
The provisions relating to disclosure and concert parties—even hotter from the press—will also, I feel, be welcome. It would have been quite wrong for the Government to rely on the Council for the Securities Industry or the Stock Exchange to find a solution 10 what is clearly a wilful and skilful abuse of the law relating to the present 5 per cent. disclosure threshold. My hon. Friend the Member for Chichester (Mr. Nelson) dwelt at length on and went into detail about the Consolidated Gold Fields case. I believe that another case involving Dunlop Holdings has also fallen victim to this phenomenon.
The other provisions to tighten up the powers of investigation and the prosecution of fraud and malpractice seem reasonable. But it is important not to cross the borderline into harassment and excessive demands for information. These provisions do not seem to do that, and their aim is laudable.
As regards the repeal of the Registration of Business Names Act 1916 and the reduction in the functions of the Registrar of Companies, I am prepared to accept the Government's word that what they plan is better and more efficient. It certainly looks complicated. It seems a pity, to put it no stronger, that the Registry of Business Names should be abolished. I take the point made by my hon. friend when introducing the Bill when he used the phrase "spurious certainty", referring to the inadequacies of the present state of the Registry of Business Names. If the registry is desirable in itself, it seems an invalid argument to say that we should scrap it because it is not working well. Surely, the answer is to make it work better.
I think that my hon. Friend was on less good ground when he referred to the need to increase substantially the cost of searches and registrations to make the registry financially viable. He referred to a fivefold increase. My answer would be "So what?" If cost is the sole reason why the registry is being dispensed with, I should think that a tenfold increase to £10 for registration and £1 for searches would be acceptable. If it is a means of cutting down Civil Service numbers, as information must be made available anyway to a company's customers and suppliers, why not consider selling off or contracting out the registry to private enterprise under some form of renewable licence? That would save the registry, save money and possibly even make a profit. Surely, that is not unacceptable to a Government who support private enterprise.
My hon. Friends the Members for Hornchurch (Mr. Squire) and Harrow, Central (Mr. Grant) referred to the multiplicity of company names operating from one address as being a possible omission from the Bill. I raise one further possible omission—the liability of a holding company for a defaulting subsidiary. This matter was raised on Second Reading in another place by Lord Ponsonby of Shulbrede. So far as I can see, he received no answer. At present, I understand that company law insists on regarding a holding company and its subsidiaries as separate entities, while in economic and management terms they are often run as a single unit. This seems anomalous and potentially dangerous. It could lead to a subsidiary securing credit on the strength of its rich parent company, but being left to its fate, and its creditors abandoned, if it gets into difficulties. What is the Government's view on this matter? Could such a measure be introduced in this Bill, or is this another instance of waiting for the Cork committee?
For all that, the Bill has put on weight since it started its passage and it will carry still more weight by Report.


There seem to be omissions—perhaps the Bill is corked—but for all that it is not the last word in companies legislation, I feel that it is immensely worth while. I believe that it will greatly improve the legal environment in which our companies operate. I wish it good progress to the statute book.

Mr. Ivan Lawrence: I have hesitated to speak, not because others have covered the points that I want to make—indeed, more humorously and effectively than I can, because that never deters me; nor will it ever do so—but because every time I open my mouth in a Second Reading debate I find myself on the Committee. The more so do I get put on the Committee when I agree with the Government, because the Government do not want on the Committee Back Benchers who do not agree with them. Nevertheless, I begin by saying that this is an excellent Bill. It is necessary to introduce its provisions. Some of them are long overdue. I look forward to the time, heralded by the Minister, when we shall have one Companies Act on the statute book—a measure which will be easy for reference and will make a sensible contribution to the conduct of an important part of our national affairs.
I agree wholeheartedly with the contents of the excellent speech of my hon. Friend the Member for Lincoln (Mr. Carlisle). It is not sufficiently widely appreciated at this time of economic recession that the Government have enacted no fewer than 50 measures to help small businesses. The Bill is a contribution to several other measures.
I shall focus my remarks on two aspects of the Bill with which I do not agree. It will not surprise my colleagues when I say that one aspect concerns the Registry of Business Names and the removal of the need of the Registrar of Companies to deal with similarity of name.
In this place we mostly have a division of view upon which substantial arguments can be adduced on either side. There is often a division of opinion m the country. The astonishing thing about the dispute over the registry is that almost every organisation that is concerned with company law is against its abolition.

Mr. Clinton Davis: I know of no organisation that supports its abolition.

Mr. Lawrence: If there are such organisations, I have no doubt that my hon. Friend the Under-Secretary of State will tell us about them. When the argument was advanced by Labour Members, there was a chorus from my right hon. and hon. Friends on the Treasury Bench to the effect that they should read the Bill. Are the Government saying that no members of the large body of opinion against the abolition of the registry—some members of it are extremely well-informed, such as those from the legal profession—have read the Bill? Are they saying that none of them has considered the Bill's ramifications or the ramifications of the Government's alternative? Such a suggestion is preposterous. Surely the Government should think again about a proposal that has produced such united opposition.
Although the alternative proposal put forward by the Government in clauses 28 to 32 will replace at no cost to the taxpayer some of what should be removed by the abolition of the register, it will not replace everything.

Substantial gaps will be left. In particular, it seems that insufficient consideration has been given to fraud. Business names are sometimes confused accidentally. That results in consumers and the public generally being misled. However, they are often confused deliberately. That is done for deliberate fraudulent purposes. Those of us who practise in the law know that there is growing activity in the international and national business and commercial scene that has much to do with deliberate misrepresentation and deceit.
It is true that the Registry of Business Names did not give legal protection unless there was proof of deliberate falsification. It may be that in that regard the correction is to make the penalties much more severe. However, the register gives protection in the sense that it provides the information upon which the legal bodies may act to correct the wrong. That is not a view that I alone express.
My hon. Friend the Member for Dorset, North (Mr. Baker) said that there was no evidence that the registry provided any protection against fraud. However, the Consumers Association is a substantial organisation that is concerned with fraud of the sort that I have described. It has said in its submission to my colleagues that there is a need to reform the register and to put it on a sound financial basis for the future. It has stated:
If the register is abolished, an important source of valuable information will be lost for the business community, for customers, for those involved in the enforcement of the law, and for journalists concerned with business affairs.
As a lawyer I have been substantially shamed and stimulated by programmes such as "Checkpoint" on the radio and "That's Life" on television. Such programmes bring home to a lawyer the practical day-to-day grass-roots consequences of the faults in our company law.
The Consumers Association added:
As a result, it will be far more difficult to control those traders who behave unsatisfactorily under one name and then change to a different one.
That to me is evidence. It is the conclusion of a body which has spent many years dealing with this branch of the law and applying its experience to the recommendations that have led to the provisions contained in the Bill. In another place Baroness Elliot of Harwood said that half of the inquiries that came before the Consumers Association when she was its chairman involved tracking down companies through the Registry of Business Names.
In my constituency there is an excellent chamber of commerce and industry. The Burton upon Trent and District Chamber of Commerce and Industry wrote to me.
Its letter states:
The feeling of our members is that the services offered by the Companies Registration Office and Business Names Registry are very important to most sectors of industry and commerce.
The letter continues:
an unsatisfactory service is worth little more than no service at all.
There was the evidence in another place of Lord Lloyd of Kilgerran, who is an expert in this area of the law. He said:
The business names register affords a source of information as one means of helping to limit confusion in the course of trade, as well as fraud and malpractices."—[Official Report, House of Lords; 19 March 1981, Vol. 418, c. 864.]
It will not do to say that there is no evidence that the register protects as it provides information that is a step on the way to reducing fraud.
There is another important practical aspect of the register—namely, the fact that when somebody is legitimately trying to establish a business and wants to


register a name it is extremely useful for him to take the short route of referring to the register to ascertain whether there is any company of the same name. I know that this is an issue that is close to the heart of my hon. Friend the Under-Secretary of State. My hon. Friend the Minister for Trade referred to it in his opening speech.
The speed with which a small business can establish itself is an important factor. The register provides a speedy way of establishing a business name without having to go through the alternative, which is a much more convoluted system of checking whether anyone else has a similar name or an identical name in the same area of business. If there is no register, the company must make much more widespread searches. It will be expensive for the company to do so. There will be a higher degree of uncertainty about the bona fides of any of the companies concerned and the process will take much longer. There will be much greater delay.
Who will suffer? It will be the members of the small business community who will suffer, those whom we are so anxious to get started. It seems that strong evidence has been adduced and a sufficiently strong argument to encourage the Government to think again.
The second aspect with which I am concerned is the removal of the need for the Registrar of Companies to satisfy himself that the new names are not too similar to the names already on the list. That is another charter for the dishonest.
A company in my constituency manufactures a food for animals. It is a patented block which animals lick. That company has a distinctive name. It discovered that another company with exactly the same name, except for one of the vowels, had come on to the market. It marketed almost solely exactly the same commodity.
I have not named names because I prefer to say nothing about the dishonesty or otherwise of that action. However, it is suspicious when a company sets up in the identical line in a unique area and worrying if there is no check to see whether that company is taking away business dishonestly from the company which is registered. That example is not necessarily helpful to the point which I am making because the problem existed with the Registry of Business Names. It shows that even in my constituency, where matters are ordered so well that we seldom have such problems, there has arisen a problem of the loss of trade, possibly through dishonesty, possibly by inadvertence, which can be caused by confusion over business names.

Sir Graham Page: I do not know when that incident of the similar name occurred, but from information which I have been given I understand that the Registrar of Companies has already embarked on applying the Bill. He is no longer checking whether the application for the name of a company is similar to that already registered. Perhaps my hon. and learned Friend's case is recent and comes under the present practice of the registrar.

Mr. Lawrence: That is so. That was covered precisely by the point that my right hon. Friend has made. I took up correspondence with the Departments of Trade and Industry. They replied that the Registrar of Companies no longer felt it necessary to make such distinctions. That is a dangerous development. I hope that the illustration which I have given will be of some assistance to my hon. Friend when he replies.
What is being abolished is not the need for the Registrar of Companies to compare identical names. Identical

names happen when there are honest mistakes. What is being abolished is the need for the Registrar of Companies to draw attention to slightly different names, which are the instrument of the dishonest. I am afraid that I find that the speech of my right hon. Friend the Member for Crosby (Sir G. Page) showing the low cost-saving figures of this astonishing introduction into our law, was most convincing. It is ludicrous to say—as was said in the correspondence in the case to which I referred—that the company concerned has a passing-off action. It is unrealistic to suggest that small businesses, which must measure the vast expenditure into which they may be led, I am sorry to say, by the legal profession—it is not entirely the legal profession's fault, but such matters drag on at great length—are not deterred from going to law with passing-off actions. They should not have to have that burden thrust upon them for no sufficient reason.

Mr. Clinton Davis: Does not the hon. and learned Gentleman agree that by the time a passing-off action may have come to trial, or even before an injunction may have been procured, irreparable damage may have been done to that small business?

Mr. Lawrence: I cannot improve on the hon. Gentleman's observation. What is wrong with our company law is the way in which some villains can too often walk boldly through the gaping holes. One can gather how often that happens by listening to ' Checkpoint" and watching "That's Life". The state of affairs is much more alarming than some of us lawyers in our cosy practices thought. It is for us in this place to fill the holes and not to make them wider. I suspect that the two provisions which I have mentioned will make those holes wider.
What are the Government's objections? They say that the Registry of Business Names is not effective at present. However, there is evidence that it is becoming more effective, if only because the banks require proof of registration before they allow the opening of an account. The improvement has been from 50 per cent. effectiveness to about 80 per cent. If anything like that figure is accurate, it reduces the strength of the point which the Government make. The fact that something is working only 60 per cent. efficiently is still better than if it is not working at all. It is demonstrably better than anything which replaces it, which will be only 40 per cent. efficient. The fact remains that any degree of effectiveness in the law in this area which the Registry of Business Names offers, the Government should be slow to remove.
It has been said by way of explanation, but it has become almost a justification, that the Registry of Business Names was not set up for that purpose and, therefore, the implication is that we are directing our attack at the wrong ship, horse, aeroplane or whatever it was. However, it does not matter why it was set up in 1916, when there cannot have been as many companies as there are now and when national and international fraud and cheating of consumers were less widespread than now. What matters is whether it is useful now.
The argument about expense is unconvincing. 'it is not an objection which small businesses, however small, are likely to raise that the registration of their businesses will be raised from £1 to £5 or that the search fee will rise from 25p to £1. That pales into insignificance when compared


to the increase in the road fund licence, for example, which small businesses must pay for their various vehicles.
Again I call in aid the excellent Burton Chamber of Commerce and Industry, which represents a substantial number of industries in my area. That is just one town out of thousands in Britain. It says:
'professional' members are unanimous in the view that there will be no objections to increases in charges if they result in a service upon which they could rely; it may also have the additional benefit of deterring some of the doubtful elements.
Therefore, I do not find the argument about cost convincing.
On the argument for reducing the number of civil servants, I have much sympathy with the Government's efforts to reduce public expenditure and the number of civil servants. I should like to see their number reduced where they are not necessary. However, the reality is that if the Registry of Business Names came to be computerised it would not take hundreds of man hours to compare one name with another; it would take 30 seconds, and would not necessarily require 50 or 60 staff. I am sure that computerisation will be as inevitable in that organisation as elsewhere, so the argument about reducing the number of civil servants is not all that convincing either.
Two other matters cause me a little concern. My hon. Friend the Member for Harrow, Central (Mr. Grant) mentioned the continual refusal to deal with the situation where someone adjudged to be bankrupt or disqualified from trading as a business can take another name out of the hat and set up in business almost without a stop. That is a repeated theme, and it is time that the Government took action. I am sorry that, now that we have another company law Bill, there is no such provision in it.
Secondly, I am a little concerned about clause 76, which concerns consolidation of the Companies Acts. It looks rather as though the procedure of the Consolidation &c. Bills Committee, on which I have the honour to serve, is to be changed to accommodate Law Commission's proposals. I am one of those trying to get the Government to find time to debate the Law Commission's proposals, some of which are extremely important. We shall lose the Law Commission if it continues to produce sensible reports that merely gather dust on the shelves. Those distinguished people have better things to do than to waste their time. The Law Commission's purpose is to reform our law, and we are not giving enough time to that.
However, that is very different from saying that the normal rules of consolidation should be changed to give effect to the recommendations of the Law Commission and the Scottish Law Commission. If the parliamentary draftsman says that the Bill is pure consolidation and that there are no changes in the law to be referred to anybody, but also that the Law Commission's proposals are to be incorporated in it, what should the Consolidation Committee do? Should we say that the Bill should not be consolidated in that form because the House has not had an opportunity to consider and debate the Law Commission's report or whether this is the right time and the right Bill? Such methods are rather dangerous. They hint at trying to get measures in by the back door. We should have a full debate about the recommendations of the Law Commission.

Mr. John Smith: I hesitate to interrupt the hon. and learned Gentleman, as I agree with so much of what he says, but may not the unusual provision be justified in the particular circumstances? Unless a consolidating Bill can be justified as pure consolidation, it will not go through the Consolidation Committee. There would have to be full-blown legislation if there was need for slight modification that was not pure consolidation to make sure that we had one Companies Act that all practitioners could use. Is it not sufficient safeguard to have parliamentary approval of an Order in Council? Should the proposal not be welcomed if at the end of the day we have a more workmanlike Companies Act?

Mr. Lawrence: Many of us do not agree with everything that the Law Commission proposes, so it may often be necessary to have a fuller debate than can take place in the early hours of the morning as a result of an Order in Council that we can pray against. Tomorrow we are to debate an animal health consolidation measure. I asked to pray against it, and, by an error of administration, that did not happen. We are there, incidentally, metricating in an animal health measure when the House has not yet considered whether we should have metrication.

Mr. John Smith: I have just looked again at the provision. It makes it clear that an affirmative order is required, so it would not be a case of praying against the measure but of the Government having to bring it before the House. Although not everything that the Law Commission proposes can be accepted in advance, one would hope that the exercise of the power would be used with great discretion and confined to technicalities. I should be prepared to accept the provision on that basis, provided that the Minister can give us an assurance.

Mr. Lawrence: I shall not take up further time arguing the point. It is a source of concern if only because it is changing the established procedure in our Committee in order, as it were, to bend what are the established rules for convenience or for whatever other purpose. It has to be watched with care. I say no more than that. I did not say that I was wholly opposed to it. I was merely saying that I was not happy with it.
The really important matters are the two to which I have drawn attention. Will they be something of a charter for the dishonest trader? If they are likely to be that, they are so contrary to this Government's philosophy that it is incumbent upon the Government to look at them again. If the Bill requires another running repair on the hoof or on the wing, I sincerely hope that it will be given it.

Mr. Bowen Wells: Speaking in this part of the debate after the contributions of so many right hon. and hon. Members I find it very difficult to make any fresh points. However, I wish to underline and reiterate some, especially those which arose in the excellent speech of my hon. and learned Friend the Member for Burton (Mr. Lawrence), whose arguments against the abolition of the Registry of Business Names I shall comment on in a moment.
I speak as a small business man with knowledge of the difficulties of attracting investment into a small company. A minority shareholder in a small limited liability company has very little power over the fortunes of that


company and therefore over whether his money is put to proper use and whether it will ever show a proper return. Therefore, the provision enabling a company to purchase its own shares makes things very much easier and encourages investment in small companies. I welcome it.
It may go some way to explain why this country, which used to be known as the workshop of the world and which the French used to describe as a nation of shopkeepers, now has one of the smallest small business sectors of all the Western European countries and one which is even smaller than that of Japan. Any attempt to ease investment into small businesses in this way is a major service in the right direction, and I hope that further legislation will follow it.
The same goes for the necessity for the rigorous accounting disclosure required at present. It imposes a disproportionate burden on a small firm, especially in the preparation of accounts. At present those accounts are prepared, inevitably, by a professional accountant and eventually find their way to Companies House for filing.
The last thing that anyone running a small firm is interested in is the production of the accounts at the end of the year. That is past history in which that person is not interested. Therefore, it is the legal requirement to do it that forces it to happen. However, in my view it is necessary as a discipline on the small company to have its accounts audited, and I am glad that the Government have accepted this advice. Even though they are to be audited in an abridged and simple form which need not take a great deal of time, they will still be a matter of public knowledge and public debate.
Obviously the move to curtail and control the activities of what are known as "concert parties" is a necessary regulatory step, and I welcome that as well.
I come to what has been heralded as the abolition of the Registry of Business Names, and I suggest to my hon. and learned Friend the Member for Burton that these provisions increase considerably the amount of control over smaller companies and go some way to stop the kind of fraud which, as my hon. and learned Friend said, is the weekly consumption of those who listen to or watch such programmes as "Checkpoint" and "That's Life".
I share his concern and horror at the fraudulent practices that such programmes reveal. That is not to say that the Registry of Business Names prevented such frauds. Indeed, it did not do so. In the other place, the former Minister, Viscount Colville of Culross stated:
the shadier you are the less likely you are to wish to pay a vastly increased sum of money. There would therefore be an added disincentive for registering yourself in the first place, and an added disincentive for changing the registration if you took over a business which previously had been registered under somebody else's name."—[Official Report, House of Lords, 7 April 1981; Vol. 419, c. 483.]
Therefore, the registry would be of great assistance in the control of such fraud.
Clause 63 goes some way towards achieving a desirable end. Perhaps it would not be too inconvenient to introduce a measure in the Bill to ensure that directors of companies that have gone bankrupt and that have not paid their creditors cannot become directors of other companies until the affairs of the first company have been settled. There are obvious dangers in that. A company can go bankrupt legitimately without fraud being involved. However, there has been a proliferation of companies with the same

directors. Reference has not yet been made to a case that was mentioned in The Sunday Times. A Mr. John Wild was a director of many firms which carried on fraudulent practices and which attracted business through newspaper columns. One after another the businesses went bust.
The Select Committee on Industry and Trade called the producers of "Checkpoint" to help with this difficult problem. They said that although the Registry of Business Names helped them initially, as investigative journalists, it gave them only the address to which they should apply. Invariably it was not the address at which the person whom they were looking for could be found. Therefore, the Registry of Business Names could help them only in a small way. The Bill's provisions make it necessary for a company's name and registered address, together with the names of its directors, to appear on the notepaper by which it trades. That would seem to answer the complaint that a company and its directors cannot be found.
I agree with my hon. and learned Friend the Member for Burton and my right hon. Friend the Member for Crosby (Sir G. Page) that we should ensure that company names are not similar. Indeed, I agreed with my hon. and learned Friend the Member for Burton when he said that a computer could easily be used. Proposed names could be entered on a computer, which could easily be made to throw out any name that was similar to an existing name. The matter could be dealt with quickly and easily. As my right hon. Friend said, the measure does not really involve the abolition of the Registry of Business Names. Many of its functions will continue. A change is being made in the way in which such matters are dealt with. That change does not give spurious protection to companies that have registered their names. People tend to believe that that means that a company is Government backed or has some respectability if it is on the register. I urge the Government to consider those two points about the abolition of the registry. We must ensure that companies do not trade under similar names. In addition, the Government should
My hon. and learned Friend the Member for Burton has talked about clause 76 and consolidation. I welcomed that—until he began to put doubts in my mind.
Limited liability companies are not really the right format, under current company legislation, whereby small businesses should be formed or can prosper. We need to look for a new form of incorporation for small businesses which is simpler and easier to manage and does not have the onerous requirements which much company legislation rightly applies to larger companies. Although the Bill moves in that direction, we need to devote much more thought to this matter and to introduce a new concept by which we can aid the simple setting up of companies, which guards against the fraudulent company being set up and, none the less, aids small businesses in getting started quickly, with the fewest possible overheads and the best possibility of fulfilling all the legal requirements put upon them. At present, small businesses do not have the time or the expertise to comply with the masses of legislation.
I commend the Bill as a step in the right direction. We shall soon be dealing with another Companies Bill, because the European Commission is determined that we shall make some steps in the direction of supervisory boards, two-tier boards, worker participation, and so on. That is another chapter to which we shall come, I imagine, next year, and that will answer many of the problems and may enable my hon. Friend the Member for Kensington (Sir. B. Rhys Williams) to achieve some of his cherished dreams—but, I trust, not at the expense of making the


small company's life more difficult and complicated. Although the Bill goes some way towards helping small companies, in some ways it makes life more complicated for them.

Mr. Graham Bright: We heard from my hon. Friend the Member for Kensington (Sir B. Rhys Williams) that he was fascinated by company law. No doubt many of the lawyers and accountants that we have heard—I think that there are two more to speak—are fascinated by company law. I see company law through the eyes of a small business man, and I have to employ accountants and lawyers to help me interpret it and to ensure that I do not get into trouble.
For a long time I have had no doubt about the need to overhaul company law. What has always amused me is the fact that companies such as ICI and a chemist's shop, or Guest, Keen and Nettlefolds and a small engineering firm employing half a dozen people, have the same accounting requirements. I cannot see why that should be so.
The operations of small companies are easily scrutinised in the present format in which returns are made. Any small company that is a one-product company can have its competitors looking at it in great detail, and they can extract much knowledge from that. So, too, can a company interested in acquiring that small company. The much larger concerns, especially where they have a complex relationship with holding companies, can easily hide or camouflage essential trading information, which the small company cannot do. Therefore, I very much welcome the changes that are to be made under the Bill to try to distinguish between large and small companies. As several of my hon. Friends have said, the Government have already done much to help small business. This distinguishing between large and small is yet another move in the right direction. One hopes that we shall get a bias towards helping small companies. This is another way in which that can be done.
The interests of small firms have never been served by the restrictions placed on them in regard to purchasing their own shares. I welcome the change in that respect.
I am concerned about how we distinguish between large, small and medium-sized companies. Two of the criteria relate to figures on turnover or capital on the balance sheet. However much we would like to do away with inflation, we must recognise that there will always be an element of it, and that could result in the ludicrous position of existing small companies no longer fulfilling the criteria for small companies. I should like an assurance from the Government that the figures will be reviewed, either automatically or every so often.
Much of what I intended to say will have to be omitted because time is running out, but I am concerned about the powers being sought for inspectors. It is doubtful whether the extended powers of investigation granted to Department of Trade inspectors in clause 59 can be fully justified. I accept that there is a need for investigation, but there is also a need to protect individuals, and there are no means for a court to decide on what an inspector considers "reasonable grounds" for supposing that someone other than an officer, agent or director of a company has relevant information. I have argued in the House before that such

powers should be available only after reasonable grounds have been demonstrated before a High Court judge, and I should like to see such a provision included in the Bill.
The scope of inquiries permitted by the Bill is theoretically unlimited and the classes of persons who can be called upon to supply information are unrestricted. The granting of such discretionary powers was certainly not envisaged in the election manifesto on which I fought in May 1979, and the appearance of such powers in the Bill is probably a tribute to the deeply entrenched inquisitorial obsession of civil servants. It is not appropriate for a Bill that extends freedom to companies in so many ways to subject them to even more unfettered powers of inquiry. I appeal to my right hon. Friend the Secretary of State to reconsider that proposal.
The new framework proposed in the Bill is broadly acceptable. It recognises the need of small and medium-sized firms for a new and reduced body of information to be supplied in their accounts, subject to the qualifying conditions in terms of audit and so on.
I have no doubt that the opportunity for companies, whether public or private, to purchase their own shares will solve one of their growing problems. It will certainly make capital reconstuction and the retention of small and medium-sized firms in the hands of their founders' families much easier.
Safeguards in the measure, with the exception of the powers of investigation that I have mentioned, are technically well judged. The Bill offers an imaginitive series of remedies to some of the problems affecting company law. It deserves the support of the House.

Mr. Clinton Davis: For the past two years, proposals for dealing with company legislation have been introduced by the Government without adequate thought, preparation, advice, consultation or, apart from the implementation of the appropriate EEC directives, any coherent theme.
Last year's Bill was to be limited to the second directive. In another place, it was to be the second directive, the whole directive and nothing but the directive. Then, as a result of the appreciation of parliamentary realities by the Minister, in introducing a Bill with broad parameters—namely a Bill to reform company law—the appraisal was significantly revised. There were introduced either in Committee, or, in some cases, on Report, important, detailed and complicated provisions late in the day to deal with insider dealing, loans to directors and associated matters. It was a disservice to the House to deal with the matter in that way. The Minister cannot say with pride that the manner in which those provisions eventually emerged reflected well on his Department.
This year, we have been treated to a similar saga of somersaults. Originally, there was to be no legislation to deal with the Consolidated Gold Fields case, although the Opposition raised the matter on the Report stage of the last Companies Bill. The Minister, at that time, suggested that the matter was so complicated that it was not appropriate to be dealt with by legislation. His attitude was that it was more appropriate to leave the matter to the self-regulatory agencies. Then, once again, perhaps characteristically by this time, he changed course. However, so late in the day has he done so, there are still no definitive proposals


before the House on a matter of great significance to British industry, much of which is ripe for financial colonisation.
Hon. Members have been presented today with virtually another Bill. The Government should change the title to the Companies (No. 3) Bill. I am not sure, incidentally how the Companies Bill became the Companies (No. 2) Bill. A vast number of detailed clauses will have to be considered. When will this happen? The clauses will presumably be discussed after hon. Members have enjoyed this great opportunity to consult lasting for 14 days! Once again, the Minister and the Department have done the House a great disservice by not waking up much earlier to the requirements and the realities. We shall have 12 sittings in Committee within which to deal with the matter. I suppose that we must be thankful that at least something is promised, albeit once again the result of pressure rather than ministerial inclination to deal with urgent requirements.
The behaviour that I have described is characteristic of the present Ministers in the Department of Trade. I should like first to refer to the ministerial inertia and, indeed, incompetence over the St. Piran affair. I noticed an interesting article in The Sunday Times about the Secretary of State. No doubt, there will be some sort of ministerial inquiry to discover the anonymous civil servant who spilt the beans about the Secretary of State's character. The right hon. Gentleman is described by this anonymous civil servant as being
no tireless scourge of public extravagance or restrictive practice. If anything, he is rather indolent". 
The Secretary of State compounds this by saying in the article:
I am certainly not always looking at the purity of my reputation". 
He can say that again. The right hon. Gentleman goes on:
Beyond some very basic things, I remain simply very agnostic about what Governments can ever achieve". 
He seems to be agnostic also about how Governments can go about destroying things. The Opposition, I have no doubt, will wish to discuss the St. Piran matter in Committee. This was a situation in which Mr. Raper—very appropriately named—cocked a snook at the self-regulatory agencies and the Secretary of State. There was a situation in which all the self-regulatory agencies literally pleaded with the Secretary of State to support them, to follow the advice of his inspectors and to petition to wind up the company.
An interesting letter was published in The Times on 8 May. It was by Mr. Patrick Neill, QC, the chairman of the Council for the Securities Industry who put forward that view. He said:
The Department of Trade and the self-regulators have a shared interest in preserving proper standards of conduct in the commercial world. Ministers should be ready to exercise their statutory powers promptly and vigorously when occasion arises and should be ready to back up the self-regulators in the common task. The alternatives are chaos or an American style SEC.
The Minister chose to ignore the pleadings from Mr. Neill, the chairman of the Stock Exchange, the former chairman of the Takeover Panel and other significant people. The result is that he has exposed still further the deficiences in the self-regulatory system about which he, in particular, has waxed so eloquent.
We have experienced, in addition, the Ashbourne case and, indeed, others. We should now seriously consider setting up a companies commission not only to review and propose changes in the law, but to assume responsibilities

currently exercised by the Department of Trade for regulating and enforcing the legal processes. It should also take over responsibility from the self-regulatory organisations. We can have our own form of SEC. We do not have to ape the Americans. We can build on our experience and base a commission on our own requirements.
Apart from failing to deal with that, the Government have no policy on the important question of industrial democracy. That issue was raised—but not using that term—by the hon. Member for Kensington (Sir B. Rhys Williams) in an interesting speech. We always expect to hear interesting and constructive speeches by the hon. Gentleman on company law. The hon. Gentleman spoke of the need to widen the duties of employees. He said that they were entitled to be consulted about essential decisions affecting their lives. I agree. In many debates I have, to a large extent, been on the same side as the hon. Gentleman.
I hope that the hon. Gentleman will be given the opportunity to serve on the Standing Committee. The trouble is that the Minister has so many critics on his Back Benches that he will find it difficult to decide whom to eliminate. Will he eliminate them all or just one or two? We shall wait and see. As always the Labour Party will be united and we shall fill the Committee Benches.
The Minister did not seize the opportunity to say anything about the abuse of window dressing which has been exposed in a number of important company reports. Should that be left to accountancy standards, or should it be dealt with by legislation? I am more and more persuaded that it should be the latter.
The Minister has been assailed by a number of hon. Members from both sides about his failure to deal with the continuing chronicle of abuse highlighted so often in the BBC's "Checkpoint" programme and "That's Life". One Conservative Member thought that "Crossroads" dealt with important company affairs. I have never watched "Crossroads" so I am not sure with what sort of affairs it does deal.
People in the country and Members of Parliament are deeply worried about the sharks who take innocent people for a ride—setting up one company after another, chains of liquidations, or companies ceasing to trade. I do not need to rehearse the matter, because it has been eloquently put by a number of hon. Gentlemen on both sides. However it is not enough to say "We must wait for Cork". I remind the Minister that on the question of the elimination of the Official Receiver service, the Government have already said that they will not wait for Cork. That is a remarkable inconsistency—apart from the fact that it would be appalling if the proposals to deal with the Official Receiver services were brought into effect. 
The Minister has said nothing—no doubt he will again say "Wait for Cork"—about the matter raised by the hon. Member for Hornchurch (Mr. Squire)—the liability of a holding company for a defaulting subsidiary. We sought to deal with that matter in the Report stage of the last Companies Bill. Again, because of the Minister's refusal to deal with real problems, we shall have to come back to the matter.
It is sad, too, that not a word has been said about how to promote common ownership companies by means of this Bill or companies legislation generally. The right hon. Member for Orkney and Shetland (Mr. Grimond) raised the matter; and it is an important subject that we should explore further. However, we shall have a chance to come


back to these matters later. Suffice it to say that the failure to respond to challenges that have been presented to the Department on the part of successive Secretaries of State seems to indicate that the stewardship of company affairs by this Administration leaves a little to be desired.
The lack of concern for the consumer has featured vividly again in the Bill in connection with the main areas of contention—a 'serious modification of existing screening procedures for company names, and the proposal to abolish the Registry of Business Names. I shall come back to those matters in a moment. First, I wish to deal with the disclosure requirements emanating from the establishment of the three classifications of companies. Much wider considerations of responsibility need to be embraced by the law for large and medium-sized companies. Modern society, with its new technology and demands, requires that duties should be fulfilled to employees, customers and society at large, as well as to shareholders and creditors. More disclosure is an important element in curing much of the present abuse. However, the Department of Trade has sought to follow a traditional approach—an approach that was heavily indicted by the hon. Member for Kensington.
The trouble is that the Bill and the fourth directive are aimed essentially at the traditional criteria. Therefore, although directors will have to indicate the company's future development, its projected profit, employment and investment levels, and to provide a note of the major assumptions underlying such projections, the Government oppose the introduction of a legal requirement for added value statements and an employment statement. They seek a voluntary approach on these issues.
In my view, the cost of the preparation of an added value statement would be small. Much of the information is readily available. It would show how the wealth of a company has been distributed—payments to employees, payments to shareholders and other providers of capital, payments to the Government in taxes, and how the balance is kept in the business to maintain or extend the company's future activities.
The value of an employment statement would be in providing sufficient information about the work force in the United Kingdom, the way employment resources are managed, an indication of the company's performance in this crucial area of its activities and an indication of the extent to which the company is meeting its social obligations—for example, how it goes about employing disabled people, training the young, and so on.
We put forward such a proposal in our Green Paper in 1977. Why do we think that such requirements should be sought? Essentially, it is the sheer concentration of industrial and economic power in our society today. In 1950, the top 100 companies in Britain produced about 20 per cent. of our national output. In 1979, it was nearing 60 per cent. and it is now over that percentage. Many such companies operate multinationally and exercise immense power. It would, therefore, seem that the choice lies between a growing concentration of private power held in relatively few but often closely linked hands, barely accountable to the community, or a greater accountability to society, to employees and to consumers as a whole.
In this respect, disclosure is a vital element in understanding what companies are about. It is a powerful element in appreciating the contribution that they make to

the economy. Therefore, for all those reasons, I do not believe that the Government ought to rely on exhortation—on the voluntary approach. Incidentally, is that not in stark contrast to the approach which they counsel in dealing with trade unions?
Having expressed dissatisfaction with the parameters of disclosure for large companies, I turn to the classification limits and in particular to small companies. In clause 8, the Government have prescribed the criteria for determining whether a company may be treated as small so as to gain eligibility for the exemptions on disclosure.
The Minister admitted today that he has accepted the maximum criteria prescribed in the directive rather than the lower figures, which would still have enabled the Government to come within the requirements of the fourth directive, which in any event, I believe, is advisory. However, I may be wrong about that. The approach that we shall want to consider in Committee is whether it would have been preferable to narrow the definition of a small company to, say, 10 employees and a turnover of £200,000—I suggest that on its own merits—and also to consider waiving the requirements for an auditor's report being attached to the modified balance sheet.
That would provide substantial savings to the owners of small companies. It would free their accountants from what one leading accountant has described as
a massive and wasteful diversion
of their professional skills. However, the Minister says that he is opposed to that. Clearly, this matter is open to important debate and we can return to it later.
I now turn to the proposals for the modification of screening of company names and the abolition of the Registry of Business Names. When listening to the Minister of State, I was reminded of a remark by a former Lord Chief Justice, Lord Hewitt, who said of counsel appearing before him:
It might be possible, but I doubt if it would be easy to compress in the same number of lines more fertile opportunities for doubt and error.
I thought that that was true of the hon. Gentleman.
In proposal after proposal consumer protection takes a back number with this Government. It is as though the Minister for Consumer Affairs were not in the Department and did not even care. It is argued that the proposal to abolish the Offical Receiver service is the affair of the companies division or the insolvency division. But it has a great deal to do with consumer protection. That compounds the mischief of these two proposals, the genesis of which had absolutely nothing to do with the merits of the arguments for reform that were adduced by the Minister of State.
It is no surprise to me that when the Government decided to merge the Department of Trade and the Department of Prices and Consumer Protection they abandoned the word "protection" altogether. It is now the Department of Trade and Consumer Affairs. Therefore, protection has gone out of the window in more senses than one. The proposal was initiated because the Minister responsible for company affairs is benign, friendly and popular, but helpless. He was told that he had to cut 91 staff. He was probably told to cut 100, but he has won a great victory by saving nine. He had to achieve that by 1 April 1982. The Government had to construct an argument to justify that objective. Under the circumstances, the rationale is bound to be somewhat defective. That is why


they are now in such a quagmire and are subject to such criticism from their Back Benches—[Interruption.] That is perfectly true.

Mr. Parkinson: No.

Mr. Davis: The Minister was not here. He left shortly after his speech. I suppose that he was satisfied with that. However, it deprived him of the opportunity to hear the amount of dissatisfaction with his speech.
Because the Bill contains contentious issues it should never have begun in another place. However, having started there the issue was lost in Committee. It was quite wrong, and unprecedented, for the Government to insist on reviving the matter on Report, especially as they had to wheel out their backwoods men to achieve the dubious result that they were seeking. The Government persisted in the measure, knowing full well that their dogmatism had met with opposition from all informed opinion, which was united in the belief that the Registry of Business Names should be retained. Who, apart from the Department, thought that the measure was a good idea?

Mr. Anthony Grant: I did.

Mr. Davis: That must be a great comfort to the Minister. He must weigh his hon. Friend's support against the opposition of the CBI, the Consumers Association and other groups. Has any organisation given support to the Department? It is a case of the man in Whitehall knowing best. The application of that maxim is bound to run into problems when the man in Whitehall is hopelessly out of step with every authority and is incompetent to boot. To add insult to injury, the Minister said that the trouble with all the other people—the Consumers Association, the National Consumer Council, the National Federation of Consumer Groups, the Institute of Trading Standards Administration, the Newspaper Publishers Association, the United Association for the Protection of Trade, The Sunday Times, the Press Council, the Consumer Credit Trade Association, the CBI, all professional bodies, the accountancy bodies and the TUC—was that they had not read the Bill. They, and the Minister, are the only people who have read the Bill.

Mr. Parkinson: Has the hon. Gentleman read the Bill?

Mr. Davis: Of course I have read the Bill, which, on reflection, seems to be more than the Minister has done. I wish to summarise the argument for retaining the Registry of Business Names. I wish to do so not only as someone who is deeply opposed to the measure, but as someone who has been a practising solicitor. I believe that the Registry of Business Names—whatever deficiencies the Minister may suggest—has been of considerable value. If someone wants to know the true name and address of the business with which he has entered into a transaction, and wishes to know its proprietors, it is an important matter. In the majority of cases that information is available. It is true that in some cases people have not registered. It is true that the most unscrupulous people would not do so. But without that information a remedy is denied. There is no effective redress in the courts. One can sue a firm, but, unless one knows who is behind it, a judgment may be empty.

Mr. Lawrence: Is there not another point about the importance of the Registry of Business Names, namely, that it provides some evidence of what is in the mind of

an offender if in due course a matter should come to court? Therefore, in providing evidence, it may also be a deterrent to crime.

Mr. Davis: I adopt that argument. I do not know why the Minister should find that so amusing. The hon. and learned Member for Burton (Mr. Lawrence), who has more experience and intelligence than the Minister of State has put forward an important argument.

Mr. Parkinson: The hon. Gentleman does not have to try to be offensive; nature made him like that. I suggest that he should stop the knockabout and devote himself to the clauses—which institute a proper procedure for dealing with this problem—which his right hon. Friend the Member for Lanarkshire, North (Mr. Smith) obviously had not read when he made his speech this afternoon. Will the hon. Gentleman now devote himself to the proposals in the Bill?

Mr. Davis: I have obviously caused some concern to the Minister of State, who is always sensitive when he is in the wrong. I shall deploy my argument in my own way without the help of the Minister of State, who has been pretty helpless throughout the debate, anyway.
Two powerful arguments have been adduced, and they have not been dealt with effectively, as I shall hope to establish, by the Ministers's proposals. We should improve the efficiency of the Registry of Business Names. I believe in regular renewals. But let us consider the alternatives and some of the lacunae. I think that I can best deal with this matter by posing a number of questions to the Minister, and I hope that he will reply to them. Who will police the new arrangements? The Bill is unclear.
Will the small fines which are suggested deter wrongdoers?
Is it reasonable that customers should be expected to find out the business identity of everyone with whom they trade to protect themselves against the risk that something in a transaction may go wrong? Is not that what the Minister is expecting them to do?
Of what value are the display and disclosure arrangements when a business ceases to trade? That powerful argument was adduced by my hon. Friend the Member for Swansea, East (Mr. Anderson). It may be necessary to trace a former trader, because he may still have some assets with which to discharge his liabilities. As the consumer associations have argued, display and disclosure requirements cannot give historical information. There will be no way of finding out about the previous ownership of a business if the Minister's proposals come into effect. What will he say about that important aspect?
What use are these arrangements if business stationery is not used for a transaction? What use are the requirements to display information inside public promises when the public have no access to such premises? If someone has conducted a shady deal, is it likely bat he will willingly allow a disgruntled customer access so as to provide him with a potential remedy? How will a customer requiring information—a customer who does not live or work near the trader—go about acquiring it?
These are important matters, even though the Minister may brush them off.

Mr. Anthony Grant: I am grateful to the hon. Gentleman for giving way, because he understands these


matters. Will he tell the House how many times in his professional experience he has searched the business names register on behalf of clients who were about to enter into contracts and how many times he has done so after clients have entered into contracts?

Mr. Davis: How can anyone answer such a question? There is regular access to the registry for a variety of reasons, especially in a practice that is not in central London—in other words, not a substantial City practice—and that deals with working class people.

Sir Graham Page: I can assure the hon. Gentleman that I have searched the register for clients but not when they have been entering business. My purpose when doing so has been to ascertain who to sue. I have had to do so on at least a dozen occasions in my practice.

Mr. Davis: I should say that on virtually every occasion when a firm is to be sued such a search will be made. That is the important argument. There is a strong case for having a more efficient registry. Higher fees would not constitute a real burden for the small business. It is pathetic to argue otherwise, although that was done by Lord Trefgarne in another place.
The introduction of renewable certificates, which would get rid of much of the deadwood, would be a useful procedure. However, we must remember that we are discussing a procedure that is substantially policed by the banks and others.
Some of the reforms that the Minister has suggested could be used to make the registry more efficient. There is no reason why those proposals should be regarded as mutually exclusive of proposals for the strengthening of the registry.
I strongly oppose clause 30, which seems to suggest that the Government will embark on a privatisation of the registry. It makes no provision for the duties that would be imposed upon such a purchaser. It is defective in a number of material respects and I ask the Minister to comment on it. I find it totally objectionable.
I deal finally with screening. If the Minister is to proceed with these reforms, why has he so far ignored the suggestions that have been proposed by the Association of Company Registration Agents Ltd? I do not have time to go into the detail of its proposals. It may be that it has briefed hon. Members. However, it has proposed a way of overcoming some of the bureaucracy that I think is needless in dealing with the screening of company names. In short, the suggestion has been made that the business agent, or whoever it is who is seeking a name for a company, should not be able to submit to the registrar a name at random and wait for the registrar to pronounce upon it. That element could be omitted.
In essence, the Government's proposals will degrade the interests of the consumer. They will impair the activities of investigative journalists and others who have a real interest in using a central register of business names. They will weaken the procedures for ensuring that rogues do not take advantage of the gaps that are bound to appear in the new proposals for screening names.
As the hon. and learned Member for Burton has said—I take this opportunity of congratulating him publicly upon becoming learned—the real mischief is the use of slightly different names. That is where difficulties will arise in

implementing the Government's proposals. It will be absurd to rely upon the remedy of passing-off actions. That is an inordinately expensive and complicated procedure. It should not be made the only real recourse available to small firms.
For the reasons that I have adduced I contend that the Bill is seriously defective. The Ministers should say that they will take it away and consider the two major proposals on which the debate has centred. If they do so, we shall be happy not to divide the House. If they fail to do so, we shall divide the House. We shall do so in the belief that we are taking the right course.

The Under-Secretary of State for Trade (Mr. Reginald Eyre): In view of the attention that has been given during the debate to part II I feel that I should begin by explaining the reasoning behind the Government's decisions in these matters. I hope that it will be understood that that will leave me with less time than I should have liked to reply to the large number of interesting matters that have been raised in the debate. However, I shall do my best in the time available.
I am aware that the proposals in part II to amend the law relating to the control of company names and to abolish the Registry of Business Names have not been well received. The references that the right hon. Member for Lanarkshire, North (Mr. Smith) made in his opening speech disclosed that he had not studied in sufficient detail the proposals in the Bill. It is generally suggested that they reflect only decisions to reduce the size of the Department and that the Government, by apparently ignoring their critics, have consistently refused to take account of the needs of commerce and the consumer. That is far from being the case.
Although the Government's announcement of the proposals in the consultative document issued last August rightly emphasised the need to use their resources in the most efficient manner and to eliminate or modify particular functions rather than permit a general decline in the services provided, there are sound practical arguments in each case. I shall refer first to company names.
It must be recognised—hardly anyone who has spoken on the matter has properly taken this into account—that there has been a tremendous growth in the number of companies registered in this country since 1948. Even in the last 10 years, the number added to the register each year has more than doubled—from 30,000 in 1970 to just under 70,000 in 1980. The registry now comprises about 800,000 names. The company name system is computerised, but the register of business names is not, for reasons that I shall give. Although the system was computerised some years ago, the final decision on each application still requires human judgment. I emphasise the total amount of business passing through that companies registry. The computer can produce only a list of what might be conflicting names. The decision can be made only by an offical considering the matter in detail and making a decision based on human judgment. Therefore, the computer can help only to a degree in those matters.

Mr. Lawrence: About 1,300 times 30 seconds, or 2 hours a day.

Mr. Eyre: Yes, but there are more than 1,300 matters per week.
Moreover, the uncertainty of the present law, which allows the Registrar wide discretion on what name may be considered to be undesirable, has resulted in many company promoters seeking provisional approval to a name before submitting formal documents. Many weeks elapse, as all such cases must be rechecked in case a conflicting name has been registered in the interim. Dealing with 70,000 new registrations, together with about 22,500 changes of names in 1980, required over 170,000 individual judgments based on an often subjective comparison with existing names. Even with the greatest care in the administration of that large and complex system, it is not possible completely to eliminate confusion.
As I said, the right hon. Member for Lanarkshire, North does not appear to have digested the provisions of clauses 22 and 23 or their relationship to the Registrar's present practice. First, the right hon. Gentleman implied that there would be no check to prevent the registration of companies by names identical to those of companies already registered. I point out that that is expressly provided for in clause 22(1)(c). Secondly, he seemed to be under the impression that the Registrar would no longer have a responsibility to sift out undesirable names before registration. Again, that simply is not so.

Mr. John Smith: I do not mind answering accusations correctly levelled, but I have checked my speech, and I did not suggest that. Secondly, my objection was that the screening of names was greatly reduced, but not eliminated.

Mr. Eyre: I do not wish to misrepresent the right hon. Gentleman, but I believe that that was the effect of his rather confused speech. If I am mistaken, I withdraw my remarks. However, I wish to emphasise that those virtues exist and that there is an ability to look over undesirable names before registration.
The Bill substitutes certain specific tests for the open-ended word "undesirable", which, under the Companies Act 1948, is all that the Registrar has to go on. Under the authority of the Act under which he operates, the Registrar is in a difficult position. In many respects, the Bill simply puts present administrative practice into law. For example, the Registrar already tests names against a list of sensitive words, such as "trust" or "British", to see whether the implications are justified. In clause 22(2) the proposal is to put the list on a statutory basis and to make it available for everyone to see, which is an improvement. Similarly, there will continue to be discretion to refuse names that imply associations with the Royal Family or central or local government. Again, that will be a proper base for future procedure.
I believe that the right hon. Gentleman referred to one aspect of the sift that the Registrar has operated in an attempt to weed out names that are not only identical, but too similar to others. Again, I do not believe that the right hon. Gentleman is taking account of the undertakings given in another place.
I thank my hon. Friend the Member for Harrow, Central (Mr. Grant) for his excellent speech. He asked me to explain the intended effect of clause 22(1)(e), which prohibits the registration of a company by a name
which in the opinion of the Secretary of State is offensive.
The expression is intended to exclude names that are, for example, obscene or blasphemous. Other categories may also be found offensive—for example, a name that would

be seriously offensive to a foreign Head of State or would incite racial hatred. That is the distinction between the two categories.
We consider that these new provisions not only will simplify administration, but, more importantly, will remove the present uncertainty in the minds of persons wishing to form companies. In this sense, I believe that the proposals are welcome and increasingly will come to be recognised as such. In this turmoil of company registration, where the system is not operating swiftly enough, and where proper use is not being made of resources, the basis that we are putting forward will result in a simplified and improved system that will operate more speedily and will come to be recognised as one of the good qualities of these proposals.

Mr. Anthony Grant: There are deep and philosophical difficulties over the meaning of "undesirable" or "offensive". The name Schmidt may be extremely offensive to some people, especially a number of Opposition Members. Equally, the name Smith may be similarly regarded. What does my hon. Friend really mean?

Mr. Eyre: In that connection, I noted the chauvinistic and nationalistic reasons advanced by the hon. Member for Aberdare (Mr. Evans) in defence of the 1916 Act when he talked about the danger of foreigners arriving here and setting up businesses.

Mr. Ioan Evans: I was making the point that the Government were going beyond the 1916 Act in altering the legislation and that that was one of the reasons why the legislation was originally passed in 1916. What the Minister has not yet done is to say why the relevant provisions should be done away with, leaving no safeguards in their place. Will he now address himself to that criticism?

Mr. Eyre: If the hon. Member reads his speech tomorrow he will understand more what I have in mind when I make this comment about the nature of his objections.
In another place, we said that we would introduce an amendment to deal with the problem of too-like names, and we have suggested two means by which this objective might be achieved short of a check on every proposal. Comments have been invited on whether proposed names should be advertised before registration in order to allow any objection to be considered, or whether a power to direct a change of name that was considered subsequently to be too like that of an existing company should be retained.
We are now considering the replies that we have received. They come from a wide range of organisations representing both commerce and consumer interests. We shall table an amendment as soon as possible. I believe that this will allay many of the fears that have been expressed, while still allowing the administrative simplification to be achieved. We could more profitably defer the detailed discussion of a matter of this kind to the Committee stage, but I want to assure right hon. and hon. Members that these proposals, properly developed and considered in detail, will be found to allay many of the fears expressed in the debate.
I stress again the importance of achieving such a simplification from the point of view of the use of


Government resources. It is not enough to argue that in terms of commercial information it is sufficient merely to increase fees so as to pay for more staff. A limit has to be set, and it is our task within that limitation to ensure that the staff are deployed where the need is greatest. I have in mind, for example, the role of positive enforcement urged upon the Government by my hon. Friend the Member for Hornchurch (Mr. Squire).

Mr. Clinton Davis: Will the hon. Gentleman now say specifically how his proposals deal with the provision of historical information which may be very important in litigation brought against someone who has ceased to trade?

Mr. Eyre: I understand what the hon. Gentleman is coming to, and it is a Committee point.

Mr. Clinton Davis: No, it is not.

Mr. Eyre: The microfilm records that are kept of company names answer the point made by the hon. Gentleman.
I come to the Registry of Business Names, which is alleged to contain details of the ownership of more than 2·5 million businesses carried on under names other than those of their owners. The protagonists of the registry claim that it provides an invaluable source of information. However, we find that a high proportion of the businesses registered either are no longer trading or have failed to update their particulars, so that an inquiry has only about a 60 per cent. chance of success.
The right hon. Member for Lanarkshire, North asked on what facts that assertion was based. A detailed survey that was made some time ago showed that over a period of weeks inquirers obtained the information that they needed in only about 60 per cent. of cases. This year samples were taken in various parts of London, Edinburgh and Cardiff, which showed an even higher rate of failure. Of the 167 businesses visited, 83 had failed to register.
That small exercise, which covered only eight streets in typical small shopping areas, required a total of two man-days to inspect the premises, to find out whether those carrying on business were required to register—because they were carrying on business in a name other than their own—to check with the register and to find out whether a notice had been put up and whether there was compliance. That high rate of failure—83 out of 167—was revealed. Labour Members should ask themselves how they would get people to comply more with the requirements of the registration system.

Mr. John Smith: Even if, for the purpose of argument, we accept the Minister's hypothesis that only 50 per cent. of the information can be detected, is that not much better than the hon. Gentleman's proposal, whereby the public will not be able to detect anything?

Mr. Eyre: The right hon. Gentleman has completely misrepresented the alternative proposals. He should give them serious consideration. They will bring about a situation that is advantageous to the consumer and will offer better protection. It is clear that a nation-wide survey to reveal the total percentage of default would require enormous resources. If my hon. and learned Friend the Member for Burton (Mr. Lawrence) would go round part of Burton's trading areas and consider how he could make

people comply with the requirement to fill in the forms on registration and send them to the central registry in order to counter the difficulty of non-compliance, he would begin to see how difficult it is to make the system work.
When it comes to allocating resources to the points of greatest need, we find that the rate of inquiries about the number of registrations is 45 times less than in the case of companies. That important point should be seen in perspective. The importance and degree of successful working and of satisfactory arrangements in the registration of business names is of a far lower order than the companies registry. I accept that we must do everything that we can to make that companies registration system work well. With the registration of business names, it is a more difficult proposition.
For all those reasons, we consider that the registry no longer serves its purpose and should be abolished. To bring it up to date and to ensure that all businesses covered by the Act complied would require resources far in excess of what this or any other Government could provide. Even to cover current costs, without providing for any improvement, the registration and search fees would have to rise considerably. To what avail? A business gains no direct protection from registration—not even the protection of its name. Increased fees could only act as yet a further deterrent to compliance.
The essential purpose of the 1916 Act can be better met by other means. The Bill's proposals will require the businesses affected to display the essential details of ownership at their premises and to show them on business documents, and they will convey a new right on any person who has dealings with the firm to require the information immediately on request in writing. That gives a right to an individual, which he will be entitled to enforce at that local level.
That will provide the answer to the essential question—namely, whom does one sue?—without the need for the Government to maintain a registry which, despite all that has been done to improve it, is only partially effective. Moreover, the information will be provided where it is needed. Information that is vital to the consumer will be provided at the very point at which business is done. I emphasise the importance of these alternative proposals, namely, that this information will be available in the locality and not at some possibly remote and inconvenient central registry.

Mr. Dennis Skinner: How many new jobs will be created?

Mr. Eyre: The hon. Member for Hackney, Central (Mr. Davis) asked a number of questions. In answering them in principle—because we shall debate them in detail in Committee—I say to him that it is desirable that consumers, in their own interests, should address their minds to the question: with whom am I doing business? The alternative proposals will cause consumers to think about that. It is an extremely important point, because the alternative system then becomes extremely helpful to them in providing the basic information that they need in connection with transactions.
My hon. and learned Friend the Member for Burton and my hon. Friends the Member for Luton, East (Mr. Bright) and for Hertford and Stevenage (Mr. Wells) referred to the


programme known as "Checkpoint", which at one stage was inaccurately described as "Crossroads". It was obvious that at least two of my hon. Friends had been very much attracted by the programme that features Esther Rantzen—and I understand that. They were raising matters connected with fraud and unscrupulous characters. I emphasise that our experience is that unscrupulous characters do not usually comply with the requirements for the registration of business names.
Computerisation is not enough, because if one computerised the registration of business names one would still have the difficult practical problem of how to get the 2½ million people who are running businesses around the country to fill in the forms and return them to the central registry. That is where the system has failed, and that is where the alternative proposals seek to introduce a better situation.
In the "Checkpoint" programme, and so on, there has been a great deal of reference to a range of activities indulged in by what I would describe as fly-by-night companies. In the Bill there are two measures that strengthen actions that are brought against unscrupulous practitioners of that kind. However, I emphasise further that proper consideration of the Cork report is necessary in order to get wider proposals to deal adequately with a number of difficulties raised in those programmes. I strongly resent the ill-practice of these fly-by-night companies. They damage the free enterprise system and do a great deal of harm to the general reputation of the great mass of ordinary, good, responsible and respectable traders.
Therefore, I look forward very much to the insolvency legislation, which I think will be brought forward next year, which will give us a proper opportunity to look at the situation of companies and the kind of bad practice that my right hon. and hon. Friends had in mind when they raised this subject. I believe that we shall then be able to bring forward carefully prepared and adequate measures to make the situation much more difficult for these kinds of swindlers.
In that connection, it is not possible to prevent all fraud in which unscrupulous characters are involved, because they take advantage of the innocence, and sometimes the weaknesses, of human nature. It is not possible by Act of Parliament necessarily to deal with all aspects of dishonest behaviour. I have spent some time on company names and the registration of business names, but I have been right to do so in view of the importance of the subject.
The right hon. Member for Lanarkshire, North suggested that new clauses on concert parties should be debated on Report, because they amounted to 20 complex clauses. I appreciate that the right hon. Gentleman will not have had time to consider our consultative document together with the new clauses, but I emphasise that the clauses largely amend and strengthen the existing law. The clauses on concert parties constitute only three or four of the disclosure clauses in the consultative document.
The hon. Member for Hackney, Central asked the Government to reconsider his proposal that companies taking advantage of the accounting exemptions should identify themselves, preferably in their names. Under clause 7(3)(b), modified accounts must be accompanied by a statement that the company has taken advantage of the exemptions as a small or medium-sized company. The Bill, therefore, already provides the substance of what the hon. Gentleman appeared to favour. Requiring companies

to include the appropriate designation in their names would involve expensive changes of name, and not necessarily once and for all, because companies may change category from one year to another.
The hon. Gentleman also asked what provisions were made in clause 61, which extends the Secretary of State's power in relation to the investigation of the ownership of companies, to deal with the problems of professional confidentiality. The law on that matter, which is contained in section 175 of the 1948 Act, remains substantially unaltered. There is a minor consequential amendment in paragraph 8 of schedule 3 to make clear that the privilege extended to solicitors by the section applies also to counsel.
Section 175 as amended will provide that none of the inspection provisions in the Act requires disclosure by a solicitor or counsel of any privileged communication made to him in that capacity, except in respect of the name and address of his client, or disclosure by a company's bankers of any information about the affairs of any of its customers other than that company.
The right hon. Member for Orkney and Shetland (Mr. Grimond) referred to the possibility of new clauses giving statutory recognition to job-ownership companies. I recognise the great value of such companies, but as we explained to the representatives of the organisation that visited the Department, there is no need to make special provision in the Bill, because job-ownership companies can be formed on the basis of the existing law. We went further because we wanted to offer positive help in drawing the attention of other Government Departments and agencies connected with the Government to the need to explain to people the availability of job-ownership companies. We shall seek to co-operate positively in that respect and to put over that information.
I apologise if I am not able to reply to points raised by the hon. Member for Bradford, North (Mr. Ford), my hon. Friend the Member for Harrow, Central and a number of other hon. Members. I believe that we shall be able to debate those matters in detail on Report.
I wish to conclude by saying that the Government have shown their commitment to the development of the administration of company law in many ways. We have established a number of beneficial proposals. On the basis of the Bill as drafted and in the expectation of adding the clauses relating to disclosure, I commend it to the House.

Question put, That the Bill be now read a Second time:—

The House divided: Ayes 149, Noes 87.

Division No. 194]
[10 pm


AYES


Alexander, Richard
Burden, Sir Frederick


Arnold, Tom
Butcher, John


Baker, Nicholas (N Dorset)
Butler, Hon Adam


Beaumont-Dark, Anthony
Cadbury, Jocelyn


Bendall, Vivian
Carlisle, John (Luton West)


Berry, Hon Anthony
Carlisle, Kenneth (Lincoln)


Biggs-Davison, John
Carlisle, Rt Hon M. (R'c'n)


Blackburn, John
Chapman, Sydney


Boscawen, Hon Robert
Clark, Hon A. (Plym'th, S'n)


Bowden, Andrew
Cockeram, Eric


Boyson, Dr Rhodes
Colvin, Michael


Bright, Graham
Cranborne, Viscount


Brooke, Hon Peter
Crouch, David


Brown, Michael(Brigg &amp; Sc'n)
Dean, Paul (North Somerset)


Bruce-Gardyne, John
Dorrell, Stephen


Buck, Antony
Douglas-Hamilton, Lord J.


Budgen, Nick
Dover, Denshore


Bulmer, Esmond
Dunn, Robert (Dartford)






Dykes, Hugh
Neubert, Michael


Eyre, Reginald
Onslow, Cranley


Faith, Mrs Sheila
Page, John (Harrow, West)


Fenner, Mrs Peggy
Page, Rt Hon Sir G. (Crosby)


Finsberg, Geoffrey
Page, Richard (SW Herts)


Fisher, Sir Nigel
Parkinson, Cecil


Fletcher-Cooke, Sir Charles
Patten, Christopher (Bath)


Fowler, Rt Hon Norman
Pawsey, James


Garel-Jones, Tristan
Percival, Sir Ian


Goodhew, Victor
Pink, R. Bonner


Goodlad, Alastair
Proctor, K. Harvey


Gow, Ian
Rathbone, Tim


Grant, Anthony (Harrow C)
Rhodes James, Robert


Griffiths, Peter Portsm'th N)
Rhys Williams, Sir Brandon


Grylls, Michael
Ridley, Hon Nicholas


Hamilton, Michael (Salisbury)
Roberts, M. (Cardiff NW)


Hannam, John
Roberts, Wyn (Conway)


Haselhurst, Alan
Rossi, Hugh


Hawkins, Paul
Sainsbury, Hon Timothy


Heddle, John
Scott, Nicholas


Hogg, Hon Douglas (Gr'th'm)
Shaw, Giles (Pudsey)


Holland, Philip (Carlton)
Shepherd, Colin (Hereford)


Hunt, John (Ravensbourne)
Silvester, Fred


Hurd, Hon Douglas
Skeet, T. H. H.


Jenkin, Rt Hon Patrick
Smith, Dudley


Jessel, Toby
Speed, Keith


Johnson Smith, Geoffrey
Speller, Tony


Jopling, Rt Hon Michael
Spence, John


Kaberry, Sir Donald
Spicer, Michael (S Worcs)


Kershaw, Anthony
Squire, Robin


Kilfedder, James A.
Stainton, Keith


King, Rt Hon Tom
Stanbrook, Ivor


Knight, Mrs Jill
Stevens, Martin


Lee, John
Stradling Thomas, J.


Le Marchant, Spencer
Taylor, Teddy (S'end E)


Lester, Jim (Beeston)
Tebbit, Norman


Lloyd, Peter (Fareham)
Temple-Morris, Peter


Luce, Richard
Thatcher, Rt Hon Mrs M.


Lyell, Nicholas
Thomas, Rt Hon Peter


Macfarlane, Neil
Thompson, Donald


McNair-Wilson, M. (N'bury)
Thornton, Malcolm


Major, John
Townend, John (Bridlington)


Marlow, Tony
Trippier, David


Mates, Michael
van Straubenzee, W. R.


Maude, Rt Hon Sir Angus
Vaughan, Dr Gerard


Mawby, Ray
Viggers, Peter


Maxwell-Hyslop, Robin
Waddington, David


Mellor, David
Wakeham, John


Meyer, Sir Anthony
Wall, Patrick


Mills, Iain (Meriden)
Waller, Gary


Miscampbell, Norman
Wells, John (Maidstone)


Moate, Roger
Wells, Bowen


Murphy, Christopher
Wheeler, John


Neale, Gerrard
Wickenden, Keith


Needham, Richard
Wilkinson, John


Nelson, Anthony
Williams, D.(Montgomery)


730-732


Winterton, Nicholas
Mr. John Cope and Mr. Selwyn Gummer.


Tellers for the Ayes:





NOES


Anderson, Donald
Harrison, Rt Hon Walter


Archer, Rt Hon Peter
Home Robertson, John


Beith, A. J.
Hooley, Frank


Bennett, Andrew (St'kp't N)
Howell, Rt Hon D.


Booth, Rt Hon Albert
Howells, Geraint


Brown, Ronald W. (H'ckn'y S)
Huckfield, Les


Callaghan, Jim (Midd't'n &amp; P)
Hughes, Robert (Aberdeen N)


Campbell-Savours, Dale
Johnson, James (Hull West)


Canavan, Dennis
Kerr, Russell


Cocks, Rt Hon M. (B'stol S)
Kinnock, Neil


Concannon, Rt Hon J. D.
Leighton, Ronald


Cowans, Harry
Lestor, Miss Joan


Cox, T. (W'dsw'th, Toot'g)
Lyons, Edward (Bradf'd W)


Cryer, Bob
McCartney, Hugh


Cunliffe, Lawrence
McDonald, Dr Oonagh


Dalyell, Tam
McKay, Allen (Penistone)


Davis, Clinton (Hackney C)
Marshall, Dr Edmund (Goole)


Davis, T. (B'ham, Stechf'd)
Morris, Rt Hon C. (O'shaw)


Dean, Joseph (Leeds West)
Morris, Rt Hon J. (Aberavon)


Dixon, Donald
Oakes, Rt Hon Gordon


Dobson, Frank
Penhaligon, David


Dormand, Jack
Prescott, John


Dubs, Alfred
Roberts, Albert (Normanton)


Duffy, A. E. P.
Roberts, Ernest (Hackney N)


Dunn, James A.
Rooker, J. W.


Dunwoody, Hon Mrs G.
Roper, John


Eadie, Alex
Ross, Stephen (Isle of Wight)


Eastham, Ken
Rowlands, Ted


Ellis, Tom (Wrexham)
Sever, John


Evans, Ioan (Aberdare)
Skinner, Dennis


Evans, John (Newton)
Smith, Rt Hon J. (N Lanark)


Ewing, Harry
Spriggs, Leslie


Field, Frank
Steel, Rt Hon David


Fletcher, Ted (Darlington)
Stoddart, David


Ford, Ben
Tinn, James


Foster, Derek
Urwin, Rt Hon Tom


Fraser, J. (Lamb'th, N'w'd)
Walker, Rt Hon H. (D'caster)


Freud, Clement
Welsh, Michael


George, Bruce
White, Frank R.


Gourlay, Harry
Whitlock, William


Grant, George (Morpeth)
Winnick, David


Grant, John (Islington C)



Grimond, Rt Hon J.
Tellers for the Noes:


Hamilton, James (Bothwell)
Mr. Frank Haynes and Mr. George Morton.


Hamilton, W. W. (C'tral Fife)



Hardy, Peter

Question accordingly agreed to.

Bill read a Second time.

Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills)

Orders of the Day — Education (School Information)

Mr. Neil Kinnock: I beg to move,
That an humble Address be presented to Her Majesty, praying that the Education (School Information) Regulations 1981 (S.I., 1981, No. 630), dated 15th April 1981, a copy of which was laid before this House on 1st May, be annulled. 
The Opposition approach this statutory instrument with a mixture of agreement, suspicion and the strongest enmity. We accept and agree with the laudable purpose of fully informing parents, pupils and the wider community about the character, personnel, administration and government of schools. We accept and agree with the public specification of curriculum arrangements, class organisation, the regime of study and homework, disciplinary custom in schools and extra-mural activities, societies and other opportunities afforded in schools. We endorse the necessity of a statement of policy on public examinations to be made by schools, but we cannot accept, agree with or endorse the purpose behind the section of this statutory instrument which relates to the publication of examination results.
The purpose that lies behind this instrument, in our view and in the view of countless teachers and educationists of all political persuasions and of none, has little to do with the benign desire fully to inform the general public, pupils and parents, and has everything to do with the stale selectivist and malign Tory education philosophy. This instrument is part of the effort that runs like a vein through all the Government's current education policy to restore the ancient regime of selection and academic success as the sole means of judging the virtue of a school.
The instrument has to be read and understood against the background of sections 6,7, 8, 12, 13, 15, 16, 17, the infamous section 18—the assisted places scheme—and section 31 of the Education Act 1980. All of them, collectively and separately, provide the means of undermining, weakening and diluting comprehensive secondary education.
When challenged on Second Reading of the measure on Report and in all subsequent arguments, the Government have denied that the purpose behind this statutory instrument and other legislation, primary or secondary, is to undermine comprehensive education by the use of these legislative means. They say that the aim is to promote the pious purpose of information for the public and the liberal cause of expanding and improving consumer choice.
Even if we were to accept those laudable purposes, we can tell them now that they will fail in both of those hopes. We think that they know that they will fail, so much so that there was never anything approaching a strong intention fully to inform or effectively to expand consumer choice.
If we examine the statutory instrument we discover that the information that it requires schools to provide is partial. It is so partial as to have an extremely limited value in terms of the promotion of the interests of schooling and education, let alone public information. Under the statutory instrument there will be no obligation on a school to list the capitation allowance for each pupil, the average class sizes in the school, the specialist facilities available and the parental contributions received and

required—increasingly so in this era of cuts, as Her Majesty's inspectors had occasion to remark at some length and with some alarm in February this year. Indeed, the statutory instrument requires none of the details that would comprise an honest picture of the physical, financial and teaching resources of a school.
The omission of those details portrays a failure on the part of the Under-Secretary. In a heated early-morning debate, which was quite devoid of Yuletide spirit, the hon. Gentleman responded to requests from my hon. Friends and myself for an undertaking that the statutory instrument embodying the requirement to publish examination results would include details about capitation allowances. The emphatic fact was that without details of what was available to, and spent on, each child, it would not be possible for anyone to obtain a clear picture of the standards of provision—and, therefore, the standards of opportunity—available within a school.
The Under-Secretary said:
I do believe in the publication of information. I have no objection to the amendment,"—
which proposed details of the capitation—
apart from the fact that we are not writing the provision about examination results into the Bill; it is going into regulations". 
We now have those regulations, but there is no mention whatever of the Under-Secretary's acceptance in principle of the amendment or, more important, of what was required from that amendment. The Minister continued:
However, we shall take into account what has been said. Capitation allowance is an important factor, as is the amount spent on books. Some information about expenditure in counties comes out in the MTA annual returns. When the regulations are drawn up, we shall seriously consider whether to include the obligation to make information available to parents on capitation allowances and the amount spent on books, whether over an area or for individual schools".—[Official Report, Standing Committee D, 11 December 1979; c. 831–2.]
The Government's failure to include such a requirement in any part of the statutory instrument represents not just the dishonesty of their approach to the publication of information, but also the betrayal of a partial undertaking and, even more, of the Minister's own common sense. The Minister knew then, as he knows now, on the basis of his teaching experience and his commitment to full information, that without such information there can be no effective deployment of consumer choice because there is no effective education through information of public attitudes and understanding of what is available in schools.

Mr. William van Straubenzee: I wish to be quite clear about the hon. Gentleman's argument. Do I understand correctly that he is critical of the regulations because they do not go far enough? Is he saying that if he were in the driving seat there would be more information, and not less?

Mr. Kinnock: My criticism of the regulations is that because of the nature of the information that they require—specifically under paragraph 15 of schedule 2 referring to the examination results that a school must produce—without other considerations, inclusions and obligations being imposed upon schools and local education authorities to give full information, they become an exercise in disinformation and the distortion of information rather than in the clarity of information, for the purposes either of the education of consumer choice or for parents.
The answer to the hon. Gentleman's question is not only that we believe that the requirement of information could go further—it is not simply a requirement of quantity—but that it should be of a different and more incisive nature. It is also a question of quality. I hope that the hon. Gentleman, who must share our reservations, will voice his reservations to obtain not only more information but information that will paint a realistic picture of a school and enable the ostensible purpose of public information and education information to be fulfilled.

Mr. J. F. Pawsey: Is the hon. Gentleman saying that if he were in the driving seat the regulations would require to give a great deal more detail about the specific issue to be put forward to schools, and that we would find a great deal more information coming forward on a specific subject? Can he answer "Yes" to that question?

Mr. Kinnock: If the question were not a repetition of that posed by the more original mind of the hon. Member for Wokingham (Mr. van Straubenzee) I might take the time to have give a detailed answer. The simplistic "Yes" and "No" that both hon. Gentlemen disingenuously require would be misleading. I am sufficiently concerned about the misleading nature of the statutory instrument not to want to engage in such misleading of public opinion. I hope that the hon. Gentlemen will listen and learn as I continue with further points.

Mr. A. J. Beith: Surely we do not need to speculate. When the Labour Party was in the driving seat it produced a list of 19 categories of information to be provided by schools, but neither captitation allowances nor money for books was among them.

Mr. Kinnock: I hope that the hon. Gentleman recalls that that happened under a less imaginative regime than the one that we can anticipate in future. It was a regime under a person who has not so much deviated as defected. I hope that our policies for the improvement of schooling in general will be both more generous in their expenditure and more effective in their administration and purpose than they were under the stewardship of Mrs. Shirley Williams. Our efforts in that direction have not been assisted by the deliberate evasion—indeed, perversion—of purpose by Her Majesty's Government, and I sadly regret that fact.
The statutory instrument that we are debating—we are not debating the record of the previous Labour Government; that is a pleasure to await other forums on other days—is devoid of any effort to provide a requirement that the school should publish details of its intake with reference to the socio-economic background or the academic ability of its pupils. That is another gross shortcoming, especially by a party that has made such political capital and frequently spouted so much about its commitment to parental choice and the frankness of information.
The Secretary of State must know that without that kind of profile of the school being made available any examination results or record of academic achievements must be an exercise in misinformation and disinformation, because the quality being demonstrated is not related to the quality of the intake of the school in terms of the proof that the school is supposed to give, under the regulations, of its efforts, excellence and achievements. That is the

saddest omission. It means that the information provided can easily be distorted and misrepresented without any reference to essential determinants such as the aspirations, expectations, traditions and achievements of a school.
A further criticism of the statutory instrument is that the regulations will result in the development of the league table mentality among schools, with all the consequences of odious comparisons, bringing demoralisation to some schools and complacency to others, resulting in many cases in a misdirection of public opinion by the misapplication of information.
Without that other qualifying information—such as the socio-economic background and academic standing and capabilities of the children, the expenditure per capita on books, the dependence of the school on external finances from parental contributions, the number of teachers, and the average size of classes—the stark and distorting fact of mere examination successes will not fulfil the aims that the Government are supposed to have set themselves of extending choice and informing parents or of encouraging the raising of standards in schools.
The Secretary of State has made a minor adjustment to his original intentions. Schools will not have to publish the number of candidates for examinations, as he originally intended. They will merely have to publish numbers in a year group and the examination results achieved by that year group. That was a concession, but it will not begin to remove or to ease the elementary dangers of the publication of examination results in the form chosen by the Secretary of State.
The league tables can still be drawn up by parents, by the local press or even—though God forbid—by schools, especially if a head teacher, a group in the staff or a group of governors has a particular market susceptibility, to put it in commercial terms, and shows all the briskness that the Prime Minister expects from salesmen in other functions to promote their schools. It is not impossible for that to occur, although in educational, social and moral terms it would be regrettable and damnable if it did occur. But even without the schools undertaking that kind of activity the local press and parents will still be in a position to draw up league tables and seek to make their choice or, In the words of section 6 of the 1980 Act, to express their preferences on the basis of that wholly inadequate and misleading information.
The league tables that are drawn up can still exaggerate success, as they can exaggerate failure, doing less than justice to the school in the deprived area that is striving to overcome the misfortunes of that deprivation and by its own light achieving great success. They can do more than justice to the school in the advantaged area that barely has to raise itself to achieve good results in bald examination terms merely because of the social fortune of the children who enter that school conventionally.
The system will emphasise and harden the obsession with examinations and the curriculum and teaching methods that that examination system dictates in direct contradiction to the advice and analysis contained in Her Majesty's inspectors' secondary survey, which was published in 1979.
If the Government are prepared to turn their back on advice of that nature, as well as good pedagogic advice from practising teachers; if they are prepared to pay no regard to the fact that our examination system is, if not inadequate, not achieving what should be achieved by an examination system, especially for the service of pupils in


the 1980s; and if they are not prepared to set their hands to the radical revision of the system they should not by their legislation be worsening and deepening the deficiencies of the system by giving it greater prominence and greater importance, and causing it to have an even more diverting effect upon scholastic achievements and teaching efforts in schools.
We have always considered that the academic obsession of the Conservative Party is misplaced. It is a channelling of regard for education into only one area of activity in education and elevating that area into a dominating importance. However, in the midst of the cuts, when Her Majesty's Inspectorate, in its report published in February, spoke of its alarm at the deficiencies in the supply of materials, of books and in the numbers of teachers, of the effect of those cuts upon the curriculum and the menace that they posed to the provision of essentials in the curriculum, when the HMIs have registered yet again their great disturbance at the growing disparities and divisions between schools in socially fortunate areas and schools in socially deprived areas, a requirement brought forth by the Government for the publication of examination results in the form that they require is much more than a misplaced enthusiasm for academic success. It is a taunt to those who are not able by means of drawing additional resources, whether physical, material or manpower, to their aid to raise the standards of achievement in their school measured by academic results. It is an insult to the efforts that they are making.
The examination system does not to any great degree test comprehension or application of knowledge. Those should be the essential requirements of an examination system. The preoccupation of academic success, the test of reportive ability almost to the exclusion of other testable abilities, means that our system is in many ways deficient. It is being counteracted by the efforts of examining boards and teachers and the demands of parents and employers. We are seeing the development of alternative methods of assessment. I hope that the Government will take notice of that development. It is a demonstration continually of dissatisfaction with the present system.
The Government are obviously not taking note of those efforts. They seek to harshen and harden the present system to lead us further away from what should be the requirements of an education system in these modern times and to elevate to even greater importance an outdated system that fails to address itself to the general requirements and challenges that children in our society have to face.
The Government still want an examination system that tests recall and regurgitation. They give that the greatest importance. They seek to make it the main if not the sole means of assessing the excellence or success of a school.
Nothing that the Government propose in the measure results in the diagnosis of the problems. Even where it becomes obvious from the publication of examination results that there are deficiencies in a school, that schools are not achieving on behalf of their pupils and of the parents who look to those schools what they should be achieving, there will be no response in the form of a cure, of additional assistance or of aid. There is no purpose of

diagnosis in this exposure of the schools. Therefore, there is no purpose of curing any deficiencies that are made obvious by that process of exposure.
No good purpose of information is fulfilled by the statutory instrument because so many necessary and essential factors are excluded. All that we are left with is the feeling that the Government now retain their original enthusiam for emphasising exclusively their obsession with academic standards. They pay no attention and care not at all for that vast majority of children who will not make their mark or make their success obvious through that means. That is all that is important to the Government. They divide our society. They demoralise our education system both with legislation of this nature and with their cuts.
The education system is already rising in its wrath against the Government. I hope that it will continue to rise, so that we can replace those obsessions and that outdatedness entirely with a novel, realistic, modern system of education that will sweep away the prejudices upon which the statutory instrument is founded.

The Under-Secretary of State for Education and Science (Dr. Rhodes Boyson): On the long day in Committee referred to by the hon. Member for Bedwellty (Mr. Kinnock), at about 7.50 am the hon. Member for Newham, South (Mr. Spearing), who has just arrived, said that possibly there would be a debate on the regulations late one evening between 10 pm and 11.30 pm, which would not be a bad thing. I welcome the hon. Member's presence, as he obviously laid the foundations 18 months ago for the debate tonight. As a schoolmaster himself, for whom I have great respect, he has arrived in good time for the beginning of the class.
There are three factors involved in the regulations. First, the right for parents to state a preference is taken for granted. The second is the right of parents, if they do not get the school of their choice, to go to appeal and to ask for the school of their choice. Third—this is the importance of the regulations—they ensure that the parents have the information on which they can make an informed choice. That is the basis of the regulations. Instead of sticking a pin in and living on rumour, there is information. The idea that parents now live in the dark about examination results in schools is not true. They live on vague rumours which are probably more dangerous in the long run than the facts themselves.
We have said for a long time that we would carry out such a measure. As the Labour Party believes in the carrying out of manifestos, I believe that we should be commended for carrying out what we said we would do.
I signed the Education (Parents' Charter) Bill with pride. It is nice to be here tonight defending something which has happened through it. It sought to provide:
It shall be the duty of every local education authority to publish a prospectus in respect of each secondary school maintained by them, containing such information about the school as the Secretary of State may by order prescribe and such further information as they may think appropriate". 
We said that clearly also in the 1979 manifesto:
Extending parents' rights and responsibilities, including their right of choice, will also help raise standards by giving them greater influence over education. Our Parents Charter will place a clear duty on government and local authorities to take account of parents wishes when allocating children to schools, with a


local appeals system for those dissatisfied. Schools will also be required to publish prospectuses giving details of their examination and other results.
We are not enacting something that has been a secret. We are carrying out our manifesto commitment, on which we fought the Labour Party. The public at the time preferred our manifesto. We shall see what they prefer next time, but if the Labour Party carries on as it has done tonight I have no doubt what the public will prefer.
Going back to the comments of the hon. Member for Newham, South, I am delighted to have the opportunity to put on record the fact that we believe that parents can be trusted with, and have the ability to interpret, information. The Labour Party does not. It is the party of the Mandarins and we are the party that believes in people.

Mr. Frank Dobson: The oranges.

Dr. Boyson: What is wrong with oranges? At least one can suck them and they are useful. I do not know whether any grow in the hon. Gentleman's constituency.
At one point we thought that we may be leading the Labour Party along the paths of righteousness. Circular 15/77 did not go as far as we wanted, but it began to put belief in people. It followed the Ruskin College speech. The Labour Party was unpopular at that time and had to consider what might make it popular.
Section 8(5) of the Education Act 1980, on which the regulations are based, is exactly the same as clause 10(5) of the Labour Education Bill of 1978, with only two words different. Indeed, all the regulations, including the proposal concerning examination results, could have been laid under that Bill and no one would have argued. My hon. Friend the Member for Wokingham (Mr. van Straubenzee) was with me on the Committee and can confirm that.
There are 15 paragraphs in schedule 2 concerning the information that schools have to give. The local education authority will have to give information not only on examination results but on transport and clothing arrangements and types of school. [Interruption] Hon. Members on the Opposition Benches are cheering to keep up their spirits. They have my full sympathy.
Although from the speech of the hon. Member for Bedwellty it was not apparent, the regulations contain 15 paragraphs, some with subparagraphs about the information to be provided. It includes matters such as whether a school is streamed or non-streamed, how to opt for courses, whether corporal punishment is used—I am sure we shall have the backing of the hon. Member for Stockport, North (Mr. Bennett) on that—uniform and extra-curricular activities. Almost every aspect of a school is mentioned. I shall come to the other points mentioned by the hon. Member for Bedwellty.
It would be an odd list if examination results were left out. Most parents are interested in them, even though they may be backward and reactionary. If a parent wants his child to go to university, it is useful for him to see whether children from a school have gone on to university to study a specific subject. It is interesting to see who has and who does not have the information at present. I should be astonished—and that is quite a good emotion from time to time—if any hon. Member had not inquired about secondary school examination results when considering where to send his child. If any has not, I shall report him

to the NSPCC. Every hon. Member wants that information. I wanted that and other information as part of a total package.
The articulate middle class represented here—including the polytechnic middle class—all obtain that information. Why should we prevent those less articulate from having it? By all means, let us have more information—and we can discuss that in a minute—but let us have this information as a beginning. I can tell the House, for instance, that fewer than half of London's comprehensive schools in 1975 had an A-level pure maths course. Should the parents know about that? We never get a straight answer.

Mr. Dobson: Of course they should.

Dr. Boyson: I seem to be getting support from the Opposition Back Benches. We are progressing. Obviously they should know about it.
There are only two objections which can be made to letting parents have this information. The first is that people cannot be trusted with it, and I find that very odd coming from members of a party who talk so much about freedom of information. We have had 110 years of State education, and apparently the result is such that the products of the system cannot be trusted with information about examination results. That is a very sorry commentary on the views held by the Labour Party It is now 37 years since the 1944 Act, but that appears to be the view of the party which gave the people a referendum on Britain's continued membership of the EEC, which must be one of the most difficult subjects to understand. Certainly I did not understand it at the time, and I still do not understand it. But apparently the people can understand that, yet they cannot understand simple information about the schools in their localities. That is a very odd view.
The people have to understand complicated manifestos at a general election, and they will have to understand at the next general election which part of the Labour Party they propose to support; and that must be about the most difficult thing of all to understand.
The second objection stems from what can only be described as the Labour Party's arrogance in believing that people cannot interpret information for themselves and have to rely upon rumour. It may be that there should be more information, and I see here the hand of the Socialist Education Association. I have no doubt that it is that body which is bringing its influence to bear here. I shall not say on whom I would put my money. Mrs. Caroline Benn is highly influential. Indeed, she has had as much influence on education as her husband has had on the Labour Party, and it will be interesting to see which way its policy goes.
I have a letter from the Socialist Education Association which states:
The Socialist Education Association believe strongly that examination results should be published, but the method of publication is important.
That is fair enough. If it wants to know input as well as output, there is nothing to stop any authority in the country from providing information to show the average standard of intake at the age of 11. I have attacked the Inner London Education Authority in the past, as have my ministerial colleagues, but when it faces reality it must be acknowledged. I believe that that authority is giving a


detailed examination results analysis covering all schools, and also details of the socio-economic intake. All credit is due to it for doing so.
Following a tale told in The Times Educational Supplement, I was interested to see a letter signed by Caroline Benn and the hon. Member for Bedwellty—obviously in alphabetical order—saying that they were in total agreement. Whenever a couple announce publicly that the are not seeking a divorce, it is wise to consider carefully whether to invite them to a forthcoming wedding breakfast. But if it means that the hon. Member for Bedwellty will be brought to the full truth, provided that details of input and output are made public, the debate goes on, and we shall be able to decide in the House whether more information should be provided than is available now.
Secrecy has to be justified. We should not have to justify the involvement in the package, of which this is only one item, of what is going on in a school. The people who want it secret are those who should have to justify it. I look for the support of the hon. Member for Stockport, North (Mr. Bennett) here, and I shall be very disappointed if it is not forthcoming.

Mr. Andrew F. Bennett: Then the hon. Gentleman must not take too long.

Dr. Boyson: I promise that I shall not. I realise that a great deal of the available time had been taken up before I rose to speak. The hon. Member for Stockport, North guides me again, as he did so often in Standing Committee.
There are two factors involved in this proposition. First, it gives parents an informed choice, as opposed to having to stick a pin into a list. Secondly, it encourages an informed and mutually supportive relationship between parents and schools.
I can look elsewhere for support, and I do not mean the newspapers to which people would expect a Conservative Minister to go for support. The Guardian is not known as a Conservative paper. On 9 December 1980, it stated:
Now that parents are to be given more choice, they must have the information which is necessary to make a meaningful choice. That means many more things than just examination results—but it must include these as well.
The Times Educational Supplement stated:
In the ultimate analysis this is an argument about freedom of information, where, for once, the politicians are in favour of openness. There is obviously some danger in league tables; there is even more danger in keeping unnecessary secrets and creating artificial news values and falsely exciting revelations in the local press". 
As time is short, I shall take another example from The Guardian. It states:
The reductio ad absurdum of such an argument"—
the argument made tonight by the Opposition—
would be to abolish the universal franchise on the grounds that voters may be misled by the newspapers.
My last quotation comes from Eric Midwinter, a longterm friend of mine, who is by no means a member of the Conservative Party. When he was with the Advisory Committee for Education he said:
Publishing exam results boldly can be misleading, but not publishing them is not leading at all". 
The hon. Member for Bedwellty referred to someone who has joined the SDP. However, if the Labour Party supports the prayer, I should call it the BDPP party—the Blindfold and Distrust Persons Party.

Mr. Martin Flannery: We always get a splendid Victorian approach from the Minister. The hon. Member for Wokingham (Mr. van Straubenzee) used to have a reputation for being progressive in education. It is sad to see that all the evidence is that he has capitulated to the right wing on education. I am sad about that.
The examination section of the document is anti educational in essence. It is Victorian. It represents an attempt to get something in by the back-door, because it could not be achieved in the usual way. It could be described as private enterprise in education, as opposed to educational enterprise. Most teachers and teachers' organisations realise that once examination results are published in the way suggested by paragraph 15, a selective educational system will be created without having to go through the educational process of selection experienced in the 11-plus.
The situation is worse than that. Although the 11-plus was bad, it was a form of educational selection. We deplored it. Those of us who had to invigilate 11-plus saw it for what it was. We were happy when that black cloud was lifted and when the approach to education could be broadened beyond the three R's and the narrow sectarian attitude that prevailed. I am sure that many ex-teachers in the Chamber—if one could call the number of hon. Members present "many"—will remember that even then schools had reputations for getting children through the 11-plus. A miserable competition would be indulged in by parents who wished to find out to which schools to send their children. Almost invariably, more children from middle-class areas passed the 11-plus.
Children with good home backgrounds, whose educated parents listened to them read, did not have as many needs as children from deprived areas, yet they were given an extra advantage in addition to those that they had. All ex-teachers know that that is true. Such a system fostered an attempt by some teachers to go to the more salubrious areas and to the schools that sent more children to local grammar schools.

Mr. Tony Marlow: I am grateful to the hon. Gentleman for giving way and I am sure that his arguments will be linked to the regulations. Does he agree that in the past, working-class children from certain inner city areas have been able to get a grammar school education and, through those schools, to reach for the stars and take on any career that they may have wished? There are now no grammar schools. There are neighbourhood comprehensives, some of which, sadly, are not of a grand style and ability, and the working-class children who in the past would have been able to go on to university and choose a career are deprived of that opportunity.

Mr. Flannery: The hon. Gentleman is starry-eyed about reaching for the stars. A few of the children who were lucky enough to get to grammar school reached for the stars, but the mass of children, who did not have the chance to reach for any stars, were those on whom the whole system was bearing down. The hon. Gentleman has not grasped that essential point. Because of the wretched backgrounds of many of the children in the extremely good school that I attended, only two passed the 11-plus examination.
The hon. Gentleman need not worry. I am coming to the regulations, the matters with which they fail to deal and to what they will provide for a lot of credulous people. They will inevitably militate against the children in downtown schools in inner urban areas who have already been massively deprived.
Parents will inevitably look carefully at examination results. Schools in the posher areas will inevitably do better and there will be an all-out struggle by parents to get their children into those schools. It saddens me to hear the hon. Member for Wokingham supporting such a reactionary attitude in education. It goes against the whole mainstream of the progressive development of education and militates against the wider approach to education that we are trying to inculcate in order to get the best education for the most children.
Linked with other attitudes of the Government, it means that children in the schools that will receive the millions of pounds from the assisted places scheme and those where parents have enough money to buy books and equipment will emerge best, and there will be a creaming off from the downtown schools of children whose parents wish them, for all sorts of good motives, to go to such schools.
I know that some of my hon. Friends still wish to speak and perhaps some Conservative Members may wish to rebel against such anti-educational nonsense. I am glad that we are opposing the Government's proposal, because it is against the good education of our children.

Mr. William van Straubenzee: The hon. Member for Sheffield, Hillsborough (Mr. Flannery) says that he is opposing the regulations. I take his remark to mean that he will be going into the Division Lobby.

Mr. Flannery: Not on this occasion.

Mr. van Straubenzee: We shall not, therefore, have a great braying of trumpets as the bullfight starts and everyone waits for the bull to arrive in the middle of the arena only to find that it is a bullock. There are many words I could use to describe the hon. Member for Bedwellty (Mr. Kinnock), but I would never call him a bullock. I trust, however, that the hon. Gentleman will follow his words with his vote and will prove that we are not engaged in merely a paper exercise. I shall wait to see the result when the time comes. I shall be eager to see how many members of the Labour Party are present to support their views with their votes.
This will be a vote against the publication of information. I wish to meet head-on the comment of the hon. Member for Hillsborough. Hon. Members could, I know, say critical things about me. They cannot claim, however, that I have ever disguised my belief that the rigid selection of children at the age of 11 into one sector or another, whatever the good intentions of the authors of the Education Act 1944, broke down. I have always believed in the broader opportunity available in a broadly comprehensive system. I believe, however, that the proponents of that system have done it the gravest harm by giving the appearance of believing that a comprehensive education equals mediocrity.
The early believers in the system were those who thought that it was possible to achieve a higher intellectual, academic and practical standard of education

for a wider group of young people by broadening the base and the spectrum of the education system that was available. In the early days of some comprehensive schools, an undue weight was given, for understandable reasons, to the less able child, who, of course, merits enormous care, at the expense of the able and those children of medium range ability, in a manner that caused great harm to the system.
This explains why I am a firm believer in the publication of examination results. The essence of the system, if one believes in it, is that a wider group and a larger number of young people attain achievements by hand and by brain. One method of measuring that achievement is through the publication of results. It is nonsense to suggest that people are not able to appreciate, or are not influenced by, these matters. One example of what I mean can be seen in the immigrant population of the Muslim community. No one can doubt the deep concern that exists in that community about the academic and other achievements of the children. In many ways, it is a splendid example of parental support and backing.
I do not accept that publication of results is the only factor that concerns parents. I can give an example. Hon. Members were able to see in the Upper Waiting Hall before the recess a remarkable exhibition of work of art by pupils of a school, which I shall not identify, in a deprived area of the North-East. Those hon. Members who attended the exhibition will know where I mean. The school has no sixth form. Some of the work was of a most gifted nature. I know some details of the school. It has a brilliant headmaster and a talented staff—a determined group of people working in an area of high youth unemployment. A tremendous spirit exists in the school, which I have visited. Will anyone say to me that the only matter about which parents are concerned is the publication of examination results? Of course, that will be one of the concerns, but they will also be concerned with the great mass of information which they want to have and which the regulations will permit.
The Opposition have a narrow-minded approach to the one small point of examination results. Parents are wiser than that. They are well able to take all matters into account and to form a balanced judgment of a school. They need the information. The regulations give them the information. That is why I rejoice in them.
I detect a swing back to a wish by parents for school uniforms. They are the means by which everyone can be sure that they are right. The less well off are isolated and identified more effectively if there is not a sensible school uniform. I am talking not about expensive blazers with expensive impedimenta but about simple, practical working clothing which is sensible for young people. I also detect a feeling among the teaching profession that that is one way—but only one—of asserting that disciplined coherence which is part of coherent school life. My hon. Friends are to be congratulated warmly on bringing forth the regulations. If there is a vote against them, the overwhelming majority of parents will be with the Government.

Several Hon. Members: rose—

Mr. Deputy Speaker: (Mr. Bernard Weatherill): Order. I remind the House that I am required to put the question at 11.30.

Mr. A. J. Beith: The parliamentary history of the attempt to provide regulations for information from schools goes back at least as far as 1976 when the then Labour Government gave an assurance, in response to an amendment moved in another place, that they would consult about such regulations. In 1977 a draft was made, not by a defector but by Miss Margaret Jackson, the then Under-Secretary of State for Education. I moved an amendment to the 1979 Bill calling for
information for each school about the curriculum, teaching methods, pastoral care, dicipline and arrangements made for the continuing involvement of parents."—[Official Report, Standing Committee E; 8 March 1979, c. 767.]
Most of them feature in the regulations.
The 1980 measure picked up where the 1979 measure left off. It made the further step of making specific provision for school examination results. The Government have become excited about it. There have been innumerable press releases. I have three in my hand. They say that the Government plan to make provision, that they are about to make it, and that they are now making it. Tomorrow another press release will probably say that the Government have made provision. Perhaps the press releases are a diversionary tactic. The Government might be saying that it is better to talk about information than about cuts and capitation grants and the impact of the Government's financial policy on schools.
The Government cannot get away with that. I support the provision of information. That will highlight some of the problems. It will draw attention to the impact of cuts on some schools.

Mr. Marlow: What cuts?

Mr. Beith: If the hon. Gentleman is not aware of the impact of cuts on schools, he should talk to some of the people who have to run and teach in the schools.
I think that the publication of such information will be an opportunity that many schools will take to point out not only the precise matters that they are required to point out but some of the difficulties under which they now operate, in the same objective way as the inspectors of education did in their report, drawing attention to the impossibility of achieving, for example, a broader spread of curriculum when they are not in a position to employ the staff to teach the range of subjects that they are being asked to teach. 
It is right that parents should have the maximum information about schools, and it is wrong to attempt to conceal from them one part of that information—examination results and examination records. I also believe that it is impossible to conceal them. As the Under-Secretary said, rumour will travel quickly where information is concealed.
It has been the practice over many years for information about examination results to be widely published. From my earliest childhood I can recall at certain times of year several pages of the local newspapers being given over to the detailed examination results of the schools in the area. The parents eagerly scanned them, particularly for details of their own children, children along the street, and children from the same village. The success rate in the schools was common knowledge and common talk. If that information is to be obtained by rumour, and if it can be produced by newspapers anyway, it is far better that it be placed in context in a report by the individual school in

which all the other information referred to is given and the school can make available further information that it thinks that parents should have.
Nor do I think, as the hon. Member for Bedwellty (Mr. Kinnock) seemed to think, that one should prevent the publication of information about examinations because there needs to be reform of the examination system. He went a long way tonight in criticism of the examination system. Although I share the view that the dominance of the examination system in our schools has some important disadvantages, I do not agree with the hon. Gentleman that the entire GCE an CSE system remains dominated by the demand for regurgitated information and excludes requirements for comprehension and for the use of information more widely. Indeed, his attack on the examination system failed to take account of the way in which both the GCE and, even more, the CSE have developed in recent years. I am surprised that he should put the matter so strongly.
Even if I agreed with the hon. Gentleman's criticism of the system, it is no answer to conceal the results that the system produces and to say that this is the one item of information that schools must not make available, must not provide to parents. I think that the information must be provided, and provided in the context of the other kinds of information referred to and the other matters that the schools will need to point out. If parents are not provided with the information, and if they want it, they will seek it out.
I agreed very much with one remark of the Under-Secretary—that it is all very well for those of us who know our way round the examination system, for people like us who know the headmasters and teachers in the area and can find out what the position in a school is. I have a good idea of the examination records of all the schools in my constituency. If I were choosing between them all, I should be in a strong position to do so. It is all right for me to have that information, but we are told that ordinary parents must not be allowed to open their newspapers and see a report of the documents that the schools have produced giving that information.
That will not do for me. I believe that the information about examination results is part of the range of information that all parents are entitled to have. It is the school's job to set that information in its proper context, and the school has that opportunity. I do not see how the regulations can be opposed, and I shall be very surprised if the Opposition carry their prayer to a Division at the end of the debate.

Mr. J. F. Pawsey: This statutory instrument requires local education authorities to publish various details about schools. And probably the most controversial are those relating to sex education and examination success.
I shall deal first with examination results. It has been argued that examination success provides a poor basis for comparison between schools because there are too many differences and distinctions that may be made between the schools, and therefore a reasoned judgment may not always be possible.
It is also argued that the quality of education cannot be measured by the bits of paper that one receives at the end of a course. That is the homespun "Don't gauge the quality; just guess the ability" philosophy. It maintains an


educational roulette, in which parents guess and hope for the best, with their choice of school being entirely governed by hearsay.
Perhaps the real meaning of the prayer is that parents should be praying for guidance. I do not seek to undermine the power of prayer. I welcome the Opposition's conversion to the idea that the Almighty may become personally involved in school selection. However, I am sure that the majority of parents share my view and want a little more factual information on which to base their judgment—a judgment based on results produced by individual schools year by year.
In assessing a school's success, the Opposition seek to deny parents the opportunity to use examination results as a benchmark. Whether or not the Opposition like it, examination results are one way to judge not only a pupil's ability but the ability and quality of a particular school. In today's educational jungle signposts are often written in a jargon that is incomprehensible to many parents. The more information that is available on a certain school, and the more information that can be reached by parents, the better. I do not suggest that examination results are the only yardstick, but they are important and must be taken into consideration by any interested parent.
This measure will be welcomed by parents. It enables them to exercise choice on the basis of real and true information being freely available. As was said earlier in the debate, in most places unofficial league tables of excellence already exist. Surely Opposition Members must understand that parents talk among themselves and produce their own lists of schools. Those lists may come about through the flimsiest and scantiest evidence. The results that will be produced and circulated will take some of the guessing out of the guidance that parents need.
A further reason why I support the measure is my belief that some of the worst educational excesses would not have remained hidden had it been possible to expose them by using this form of table and if parents had been able to exercise a judgment based on examination success. Even the most casual of parents is likely to question why school A has more success than school B when both schools are broadly similar. The object of the regulations is to enable ordinary parents to exercise a more reasoned choice for their children, for I maintain that parents know best what is right for their own children.
The 1980 Act was designed to allow more parents more choice. That choice can be intelligently exercised only if parents have real and helpful information available to them. The regulations provide that additional source of information. It means that parents can make an informed choice of school. That must contribute to the development of a better relationship between school and parent.
I hope that when my hon. Friend the Minister replies he will comment on the difficulties likely to be experienced by ethnic minorities. I hope that he will provide the necessary assurances that in those areas information will be multilingual and produced in a form that enables all parents, irrespective of language, to have the same opportunity to make a reasoned and deliberate choice of school for their child.
One other piece of information that should be readily available is the names and addresses of all school governors. For a long time I have been convinced that there is inadequate contact between school governors and individual parents. A school governor should provide the sort of service that an ordinary local councillor provides

within his community. School governors have an important role to play and have a responsibility to school, staff and parents. They should not be anonymous; they should be readily accessible. I look forward to my hon. Friend's comments on that point.
I turn to the second controversial point—[HON. MEMBERS: "Come on".] Opposition Members must be patient. I listened to them and gave them a fair run for their money. Let them now do the same for me.
There is a requirement that information should be given about the manner and context in which sex education is given. I have here some of the most pornographic material that I have ever seen. It is produced by the Brook Advisory Centre—[Interruption.]Labour Members may laugh.

Mr. Dobson: I do.

Mr. Pawsey: The hon. Gentleman might laugh on the other side of his face if he could see the contents of this file. Would he continue to laugh if he knew that his children were exposed to this sort of rubbish?

Mr. Dobson: That admirable organisation, which the hon. Gentleman is about to malign, is located in my constituency. I am glad that its headquarters are there. It does valuable work. I should be happy for my children of both sexes to see all the documents that it produces.

Mr. Pawsey: Before the hon. Gentleman gives that blanket assurance he should have the advantage of seeing that which is printed. Knowing him as I do, I feel confident that if he saw the contents of this file he would rapidly change his mind. The literature—I use that word for want of a better term—shows full frontal pictures and goes into considerable detail about sexual intercourse. Little is left to imagination and still less to prayer. If any of my children were exposed to this sort of material I should take the most strenuous exception to it. Certainly, the majority of right thinking parents would share my view on the material contained in what is called a contraception teaching pack.
Parents should have the clear right to see what is printed here and decide for themselves whether such material should be disseminated by the Department of Education and Science.
I turn next to a point made by my hon. Friend the Under-Secretary. Labour Members are committed to the general principle of greater freedom of information. They have sought to ensure that across a wide spectrum people have access to information that is currently regarded as confidential. Their argument is based on the belief that the individual should decide for himself and on the principle that he should have the clear right of inspection. Yet such is the hypocrisy of Labour Members that they seek to deny that basic right to the parents of children in schools.
Of course, parents should be given information enabling them to judge the merits of a school. The printing of examination results will add to the sum of their knowledge. It will allow them to exercise a greater degree of freedom and choice. That is all that this regulation is about.

Mr. Andrew F. Bennett: I am pleased that the Conservative Party is so enthusiastic about these regulations. I hope that that enthusiasm will be matched by the money to ensure that the schools can afford to publish these prospectuses. In particular, will the


Minister give us a guarantee that schools will be able to afford to conduct this operation? I greatly fear that a lot of schools will find that by producing the brochures they will be unable to afford also books for fifth year physics or some other subject. That is likely to be the case in many schools.
The Government should also give some guidance on how elaborate the brochures should be. My experience of schools prospectuses is that many schools waste a lot of resources in trying to turn out advertising brochures.
My main concern tonight is the Conservative Party's whole philosophy that the parent must make a choice, that parents are inadequate if they do not insist on doing so. The Tories want to produce the "Which?" guide to schools, but they do not say to what extent that will produce dissatisfaction among parents and pupils. Making a choice is extremely difficult. It is hard for parents to know what is right for their children. It is also difficult to work out what sort of school exists behind the statistics. If we solved all of those problems, the truth is that a lot of people would still not get their first choice. I would go along with the regulations if the Minister could guarantee that every parent would get his first choice for his child. However, the truth is that the more we encourage choice the more likely we are to disappoint many people.
There are many other snags. The main one is that choosing a school is not like making a decision about buying a vacuum cleaner or a new car. The situation in schools is continually changing. What would a person think if he bought a new car and the salesman said "After you have had it for six months we shall put a quite different engine in"? We all know that head teachers and individual teachers change and, as a result, the status of a school may change in seven or eight years. That is a major problem in trying to predict what will happen.
There are similar difficulties with examination results. Often a school has marvellous results for one year. Then the teacher responsible moves, or suffers ill-health, and the basis upon which parents made their choice is altered.

Mr. Dobson: Does my hon. Friend agree that basing decisions upon plain examination results, as proposed, would make things difficult for those schools where parents and teachers are struggling to improve the situation? The school would be judged on results which stemmed from an intake five or seven years earlier.

Mr. Bennett: I accept that point.
I welcome the regulations dealing with school uniforms. All costs that a school imposes on parents ought to be met in this way—visits, trips, and so on. I welcome, too, the fact that a school will have to state its punishment record. What will the Minister say about a school that changes that system when a child is in the school? There are many other points that need to be raised, but I shall end my speech now because of the shortage of time.

Dr. Boyson: I shall not have time to deal with all the points that have been raised, but I can assure my hon. Friend the Member for Rugby (Mr. Pawsey) that it is specifically provided for that where there are large ethnic groups the necessary information shall be published in the languages of those groups. As to the point about the publication of the name of the chairman of the governors, it is up to the local authority to decide whether he or she shall be named, in the same way that it decides about naming public officers.
The regulations also cover the subject of sex education. A school must say how it is approaching the subject and parents are able to discuss the issue with the head.
The speeches of my hon. Friends the Members for Wokingham (Mr. van Straubenzee) and for Rugby and of the hon. Member for Berwick-upon-Tweed (Mr. Beith) were welcome. They certainly hit the nail on the head with regard to the point about parental choice. I do not understand the hon. Member for Stockport, North (Mr. Bennett). Because he believes that no one can have choice for all of the time, he believes that everyone should hang around while he and I reorganise the whole country. Because we cannot give all the information he believes we should not give any. He says "If you cannot have. the Encyclopaedia Brittanica, you cannot have the Oxford English Dictionary". I do not understand that kind of despair from the hon. Member, for whom I have considerable respect, and who must have been a good teacher in the classroom. We are providing some information, as a beginning. We believe that people have the right to choose. They grow in maturity when they have choice. They will back schools if they have the right to choose for their children.
I said in an earlier debate that I believed in miracles, but I cannot guarantee, as the hon. Member for Stockport, North asked, that every parent will get the school of his choice for his child. Our schools are not rubber-sided. But we can say this: we can actually organise it so that at least parents know what is going on in the school and so that the vast majority can get the schools they want.
My last illustration comes from Richmond. There, the examination results have been published and the take-up of the schools which were less popular is now greater. Those schools are more popular than they were before. Why? Because the parents know the whole story. Before then, they relied upon rumour, the state of affairs which hon. Members opposite desire.
Since we have been talking about rumour and non-rumour tonight I hope that hon. Members opposite, believing that their view is held also in the country, will vote so that we can see the clear difference between the two sides of the House, because there is no doubt—

It being half-past Eleven o'clock, MR. DEPUTY SPEAKER put the Question pursuant to Standing Order No. 4 (Prayers against statutory instruments, &amp;c. (negative procedure))

Question negatived.

Orders of the Day — Domestic Rates

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Brooke.]

Mr. Christopher Murphy: I wish to draw attention to the urgent need for the examination of alternatives to domestic rates. The Domestic Rates (Abolition) Bill, which I introduced into the House in February, and which I urged the Government to find time for this Session, was intended to assist in carrying out what has been a firm strand in Conservative thinking for many years.
In 1974, the party manifesto contained a pledge that
within the normal lifetime of a Parliament we shall abolish the domestic rating system and replace it by taxes more broadly based and related to people's ability to pay.
In 1979, this commitment understandably became
cutting income tax must take priority for the time being over the abolition of the domestic rating system.
In the view of many of us on the Government Benches, and particularly of my 11 hon. Friends, who co-sponsored that Bill—the Members for Newark (Mr. Alexander), Birmingham, Yardley (Mr. Bevan), Gravesend (Mr. Brinton), Luton, West (Mr. Carlisle), Chorley (Mr. Dover), Dartford (Mr. Dunn), Portsmouth, North (Mr. Griffiths), The Wrekin (Mr. Hawksley), Meriden (Mr. Mills), Rugby (Mr. Pawsey), and Aldridge-Brownhills (Mr. Shepherd)—the time has come to start movement in the direction of fulfilling this obligation to the electorate, and, as part of that movement, the examination of the alternatives available to domestic rating is imperative. I also commend to the Government the pamphlet "The Great Rate Debate" by my hon. Friend the Member for Lichfield and Tamworth (Mr. Heddle) as a helpful contribution to such studies.
It is sad that there is no Member in the Chamber tonight representing either the Liberal Party or the Labour Party, or, indeed, the new brand of Social Democrats. So much for their interest in the basic subject of domestic rating and its abolition.
The system of rating has a long history, predating as it does the Elizabethan Poor Relief Act of 1601—the legislation that provided the foundation for the modern form of local property taxation. Since that time various changes have been sanctioned by Parliament until the General Rate Act 1967 replaced and consolidated most of the former statute law relating to rates, and subsequently further exemptions and rate rebate schemes were introduced.
However, despite the passage of time, or perhaps because of it, we are left with the anachronism of domestic rates. Such an anachronism must be removed by finding a realistic alternative. To the vast majority of people—this is certainly reflected in my own constituency—the domestic rating system is iniquitous, being as archaic as it is manifestly unfair. I ask hon. Members to reflect upon the overwhelming desire of their fellow citizens that it should be abolished.
There has been growing concern regarding the continuation of this means of raising finance—a concern rapidly deepening as local authorities in far too many cases are still not prepared adequately to control their own finances. Such a consensus provides the opportunity to

break with this outmoded method of gathering revenue and at the same time it signals the vital requirement of examining alternative options to domestic rates.
There are many reasons to be critical of domestic rates, all of which need studying if alternatives are to be considered. Perhaps the most important, as my right hon. Friend the Prime Minister has succinctly put it, is that
rates are unfair because they are not related to the ability to pay.
I am sure that, as is so often the case, many of my hon. Friends will wholeheartedly agree with the Prime Minister. Many hon. Members are all too well aware of the inherent problems that occur when similar houses have similar rate bills, irrespective of the number of occupants using the services provided by the local council.
The next most important criticism revolves round the actual rateable values themselves. Infrequent valuations mean that the system is operating on out-of-date information for most of the time. But worse is the fact that they are based on hypothetical rental evidence, with all the inconsistencies that that is bound to engender.
Further arguments against domestic rates are legion. Rates are paid by fewer than half of those who vote in local government elections. Rates result in householders shouldering a disproportionate share of the burden of paying for local finances. Rates of themselves are inadequate to finance local councils. Rates are regressive, because they bear most heavily on those with the lowest incomes. Rates assessments are arbitary and unfair, because they often vary widely between seemingly similar houses. Rates do not produce the same financial resources for local authorities that have similar needs. Rates are an "inelastic" source of revenue, because they are not immediately responsive to changes in general price levels. And so the indictment goes on and on, adding weight to the inevitable conclusion that action must be taken now to initiate an examination of alternatives to domestic. rates.
A number of proposals have been put forward as possible replacements for the domestic rating system. Amongst the most popular that have been canvassed by those advocating continuing local accountability are a local poll tax, a local income tax, a local sales tax and a local payroll tax. Other suggestions have included straightforward national funding from taxation, rates based on a capital valuation, reducing the number of services paid for out of rates, and various combinations of differing methods of finance raising, all of which require thorough and speedy examination.
If domestic rates are to be abolished, which should be sooner rather than later, I call upon the Government to take rapid strides in examining these alternatives and in providing guidance. If domestic rates are to be abolished I call upon the Government to bring forward, with all due speed, a Green Paper, at the very least, to ensure that the necessary process of consultation is embarked upon without delay. If domestic rates are to be abolished I call upon the Government to indicate their determination to proceed with appropriate legislation at the earliest possible time.

Mr. Sydney Chapman: I am sure that the House is grateful to my hon. Friend the Member for Welwyn and Hatfield (Mr. Murphy) for raising such a crucial subject, and, if I may presume to say it, the fact that an inordinate number of my hon. Friends stayed to


listen to him illustrates and reinforces the deep-seated feeling of many hon. Members, at least on the Government Benches, about the iniquities of our present domestic rating system.
I believe that my hon. Friend and I are two of a growing number of hon. Members who are convinced that the rating system needs to be replaced. I would extend that to the whole of the rating system rather than confine it, as my hon. Friend has done tonight, to the domestic element, because I believe—and my hon. Friend spelt it out in eloquent terms—that the system is unfair, illogical and archaic.
I want to reinforce two of the telling points that my hon. Friend made. First, although the rate support grant represents, in round terms, about 60 per cent. of total local government revenue, and although recently—in relative terms—a rate rebate scheme has been introduced to help those who find difficulty in paying this iniquitous impost, the fact is that those two measures have only marginally softened the injustice of the impost and have in no way removed it.
Secondly, I believe that the abolition of the rating system and its replacement is now a matter of urgency, if only because of the way in which some profligate Socialist councils have abused the system. They care naught for their ratepayers' interests and seemingly are determined merely to cock a snook at the Government. They find that the most convenient way of doing so is by spending more and more, irrespective of the needs of those who live in their communities.
I call in aid one statistic to reinforce this argument. Last year the rates revenue of all local councils added together came to £8,705 million. That is the estimated outturn that the Government have calculated. This year the Government calculate that it will be about £10,285 million. That is an increase of no less than 18·2 per cent., which is well above the rate of inflation that has taken place in the past year. However unfair the rating system was last year, it is that much more unfair this year.
My hon. Friend the Under-Secretary of State knows that I have been a persistent questioner of Ministers about the rating system. I understand only too well the problems of finding an adequate and revelant substitute. However, I hope that, at least as a first step, the Government will publish a consultation paper that sets out the options, with preferably their initial comments on each of them. If the Government do that—it may be that they come to the conclusion that the system should be amended rather than repealed, but I hope not, because I think that the force of logic is on our side—preferably before the Summer Recess, a national debate may ensue and it may be that despite the fact that there are no Opposition Members in their places a consensus will be found that crosses party political bounds on a substitute for what my hon. Friend and I have described as an iniquitous impost, by any standards.

Mr. Richard Shepherd: I am grateful to my hon. Friend the Member for Welwyn and Hatfield (Mr. Murphy) for the opportunity of debating the rating system. The present state of the system is of great concern to all my right hon. and hon. Friends. It is curious that the Opposition parties, be they the Labour and Liberal

Parties or the tentative SDP, all have similar grave concerns about the rating system yet do not find the time or the convenience to be present in the Chamber for this debate. It may be that their absence reflects on their involvement in these matters and their disdain for practical and concerned action in an area that concerns all my right hon. and hon. Friends.
Over the past two years we have been grateful for the attention given to this issue by the Department of the Environment. However, I have great reservations and concern about the practicalities that have been pursued. The argument in the DOE seems to have revolved on whether our first commitment is to reduce personal rates of taxation. It has been argued that after we have mastered that difficult and tendentious area of our national life we shall address ourselves to some form of remedy to the existing rating system.
When I was first elected to the House I was fortunate to come relatively high in the private Members' ballot. I tried to propose a Bill for the abolition of domestic rating in future to give the Government an opportunity to consider ways in which that could be effected. I do not think that we can view the rating system in isolation from direct taxation. They are one and the same thing. Those who pay rates are effectively paying taxes. In order to be talking about a reduction in our direct taxation of one form or another we must have a view of the rating system.
My anxiety and concern is that we have failed to do so for two years. My anxiety and concern is that despite the absence of the Social Democratic Party, the Liberal Party and the Labour Party, when' they come to the next election they will proclaim something that is part of our national inheritance. I am proud to be a member of a party whose leader, now Prime Minister, espoused the cause of the abolition of domestic rates. That is as recently as five or six years ago. Unfortunately, the question has moved wider. As we have seen the march of central Government and local authorities, we have also seen the burden imposed on local businesses. The challenge that confronts our economy today, for companies, is not so much the level of corporation tax, but the growing burden of the local authority rate.
What I want to hear from the Government and from my hon. Friend the Minister is not that they have tentative arrangements in the Department to look again at the well-tilled soil of rate reform. The history of the last 20 years is a review by various committees inspecting and evaluating ways in which to tackle the central problem, which is acting as a burden upon my electorate and the constituents of every hon. Member in a way that no one would have conceived just 20 years ago. It is not a marginal tax but a direct, heavy burden on business, employment, and, in the end, the international competitiveness of our nation.
Therefore, it behoves the Government to direct their attention, as part of the overall taxation of this country, to the way in which we determine local rates. I urge the Government not to talk about priorities of direct personal taxation but to take into account the fact that of the 35 million electors only 13 million pay rates. We already recognise that that is part of. our direct taxation system by the fact that there are rate rebates, as my hon. Friend the Member for Welwyn and Hatfield said. Surely that acknowledges the fact that it is part of our taxation burden.
I hope that when the Minister considers the matter he will give some indication that the Government will not


have yet again a committee of wise men, dredging over the same information that is well known to every hon. Member and not unfamiliar to every ratepayer, but are purposefully detailing the way in which they are proposing to lessen the burden upon those unfortunate few who have to pay that tax. In that review of the personal situation, the Government should not discount or disregard the present burden on our employee-producing sector of the economy—small and large businesses—to whom we look to further the economic interests of the community at large.

Mr. J. F. Pawsey: I also congratulate my hon. Friend the Member for Welwyn and Hatfield (Mr. Murphy) on his initiative in introducing this Adjournment debate. I am particularly grateful to him for allowing me to enter the debate on his coat tails. 
My hon. Friend properly described the present system of rating as being grossly unfair and iniquitous. He is entirely right in that description. The anomalies that are being created are drawing the whole system of local government increasingly into disrepute. I do not underestimate the difficulties that are inherent in discovering a new method of financing local government, but the effort should be made within the lifetime of this Parliament.
The problems of domestic ratepayers and of industry are increasing. They are now even spilling into the general area of water authorities. No hon. Member can seriously dispute that it is a ludicrous system that bases the water bill on the size of house that is occupied. That is nonsense. If local government is to remain, as I hope it will, it must have the right to raise its own revenue. It must decide on the size of its services and it must have the power to raise revenue for that purpose. However, the method must surely reflect people's ability to pay, and that is the greatest defect of the present system.
For even with the safety net of rate rebates, a great deal of unfairness exists. The system appears to select for greatest injustice the poorest and the oldest—one-parent families and old-age pensioners. The Opposition talk a great deal about those groups, yet the Opposition Benches are deserted tonight. Perhaps that is a comment on their concern for the elderly and one-parent families.
The system remains after years of protest only because it is a relatively cheap method of collection, which is a poor justification for maintaining a system that is outdated and unpopular. It should be buried under a mound of final rate demands, on the nearest town hall steps. RIP should mean not so much "Rest in Peace" as "Rates into Pulp."

The Under-Secretary of State for the Environment (Mr. Giles Shaw): I add my congratulations to my hon. Friend the Member for Welwyn and Hatfield (Mr. Murphy) on selecting this moment with impeccable skill. I also congratulate my hon. Friends the Members for Chipping Barnet (Mr. Chapman), for Aldridge-Brownhills (Mr. Shepherd) and for Rugby (Mr. Pawsey) on participating in the debate. It is noteworthy that many colleagues are here to lend their support to active discussion of the problem. I only wish that I could congratulate myself on the skill with which I can reply in the nine minutes that remain.
There are certain points on which we agree, and I hope that I shall be able to deal with those in the time remaining. My hon. Friends are articulate and implacable opponents of the present rating system. There is no doubt about the way that it affects families and in particular the elderly and disadvantaged. There is plenty of evidence of that fact. Domestic rates have been a serviceable tax for many centuries, and they probably were at one time a fair method of local taxation—and we must remind ourselves that we are talking about local taxation. However, for some years they have been seen to contain many inequities. The rebate system removes only some, by providing relief akin to a tax allowance for up to about one-fifth of households at the lower end of the income scale, but there remain many unfairnesses between households of similar income paying dissimilar rate bills. All those problems are, of course, felt much more keenly in a period of rising rate bills. Industry and commerce—and my hon. Friend the Member for Aldridge-Brownhills was eloquent on this point—are much more sharply affected by rate burdens at such a time.
The Conservative Party is no recent convert to the cause of removing the unfairnesses. We have gone on record to that effect for a long time. Our previous manifesto was mentioned, in which we said that cutting income tax must take priority for the time being over abolition of the domestic rating system. However, that does not mean that thought is not being given to changes that may be made to the system. We are not holding things back simply because we are presently committed to tax cutting. 'The House knows that an important start was made in reducing income tax shortly after we took office, and that such reductions remain a primary aim. Action on domestic rating remains a clear objective, but it must be seen in the context of our other fiscal and economic aims.
In relation to local government, for instance, the overriding priority so far has been to tackle the root cause of high rate bills. My hon. Friends would do well to recall that reductions in the scale of expenditure may be a more effective way of easing the burden than altering the revenue base. Local authorities have been asked to reduce their spending this year to about 5½ per cent. below the level when we took office. Their co-operation in achieving that is something that we shall continue to pursue most vigorously, determined as we are that public sector spending should be at a level that the country can afford.
I believe that many local authorities and most councillors are, in the main, well aware of the constraints and the needs of the national economy. Their spending decisions are beginning to reflect this understanding. The changes made in Exchequer grant for current and future years will help. Block grant makes it more expensive for authorities to spend above a reasonable level and thus provides incentive for authorities to avoid excessive levels of spending. It is against this background that we have been examining a wide range of possible alternative sources of revenue.
To those who think that we are being slow, I would say that in many ways we are breaking new ground. It is often thought that the Layfield committee on local government finance, which reported in 1976, recommended the replacement of domestic rates by a local income tax—yet this is not so. What the committee actually suggested as one of two possible approaches was the addition of local income tax to domestic rating in order to reduce Exchequer grant. What this Government are doing is to explore


options for replacing domestic rates completely; and any tax that is to become the sole source of local revenue for local authorities must be found to be not only fairer than rates by the people paying but also a practicable instrument of local revenue raising. It has to function smoothly in local authority budgeting; for example, it must encourage prudent taxation and expenditure by councils.
Let me say also that we want a widely acceptable reform of the rating system that will last. We are therefore right to study this matter carefully so that we can develop proposals that will stand the test of time.
We are, as I have said, examining all feasible alternatives, including the suggestion that the system itself should be retained but reformed—and I noted the ill will with which that suggestion was received by at least one of my hon. Friends—for example, with modifications to the basis of rateable value, or modifications so that liability for rates takes account of the number of earners or adults in a household. Some of these were considered by the Layfield committee; some have been put before us by other sources.
Let us not forget, however, that the yield from domestic rates in 1980–81 was £3·6 billion. The figure quoted by my hon. Friend the Member for Chipping Barnet referred to the total domestic and non-domestic rate income. However successful local authorities are in reducing expenditure, much of that revenue will continue to be needed to help fund an essential range of local services. The scope of the problem is considerable: to raise the required revenue entirely by means of a poll tax would equal £90 to £100 for each adult; 4p would need to be added to the standard rate of income tax; or, if an indirect tax were preferred, 4 or 5 per cent. would be added to VAT.
Each of these options, together with others such as a local sales tax, has its proponents, but each creates its own problems. I can illustrate this by reminding the House of what my right hon. Friend the Secretary of State said about the idea of a local income tax, recommended as an addition to rates by the Layfield committee. It is also an alternative source of revenue to which the right hon. Member for Manchester, Ardwick (Mr. Kaufman)—who is absent like all other Opposition right hon. and hon. Members—appears to have committed the Labour Party. Whilst it is a system with some attractions, the major difficulty is clear: all the efforts of my right hon. and learned Friend the Chancellor of the Exchequer in lowering national income tax levels could be put at the mercy of over-spending Labour authorities.
But let us look more closely at the examples, which have been mentioned. Domestic rates yielded £3·6 billion in 1980–81, and any new tax must be capable not only of producing a sufficient yield overall but of providing an independent source of income for each of the 521 main authorities in Great Britain; and, of course, the replacement of domestic rates raises wider issues about local government finance and the Government's taxation strategy—I take entirely what my hon. Friend the Member

for Aldridge-Brownhills said about taxation being the name of the game—as well as having major economic effects, particularly on housing, on the retail price index, and on distribution of income.
All of the options which we have been looking at would have effects in some of these areas, some in all of them, and they will have to be considered most carefully. I have mentioned a local income tax. This option would certainly be more equitable than rates as it would increase the numbers bearing the tax from around 20 million to about 28 million and would mean that, where more than one member of a household was earning, a contribution more appropriate to the use made of services provided by local authorities would be made.
On the other hand, apart from the effect on taxation levels of excessive spending by local authorities which I have already mentioned, there would be administrative difficulties in introducing a form of local income tax.
A local sales tax, something which operates in the United States, also has its attractions. With this, the whole population of some 54 million would contribute towards local services by payment of a tax on goods bought locally at a level set by local authorities—which might be 4 or 5 per cent. There might be similar administrative difficulties in introducing such a tax, and it would involve burdens on shopkeepers and other traders who already have to deal with value added tax. Indeed, the interaction between a local sales tax and VAT generally would have to be examined closely.
With a poll tax, the number of people making a contribution would be around 40 million if it were levied on all adults. Local authorities would be able to predict the yield from such a tax reasonably accurately—provided that problems of registration could be overcome—and it might be possible to link it to ability to pay by allowing for a rebate scheme. On the other hand, I must warn my hon. Friend the Member for Welwyn and Hatfield that the problem of registration might prove difficult; it is unclear whether the electoral roll could be used, or whether it would be sufficiently accurate if it could. The point about accuracy and updating the system was an important aspect of my hon. Friend's contribution. Finally, if the whole of the revenue currently provided by rates were to be raised by means of a poll tax, the amount levied on each adult would have to be around £90, or £100 if a rebate scheme were to be introduced.
Every alternative must be looked at closely within the framework of local government finance. Excessively high rate bills flow, in the main, from irresponsible expenditure plans, and we must deal with that. This is the central dilemma.
I cannot say yet when a full announcement will be made, but I hope that my right hon. Friend will have something to say about this tomorrow. However, we are concerned that the right—

The Question having been proposed after Ten o'clock and the debate having continued for half an hour, MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at Twelve midnight.